August 29, 2016 - Assignment

Nordea launches its first capital requirement-reducing EUR 8.4 billion synthetic securitization

On 24 August 2016 Nordea completed the sale of certain credit default swaps; transferring credit risk on EUR 8.4 billion of its corporate loan exposures to a select number of investors.

The risk transfer is achieved through a collateralised CDS structure and no assets will be derecognised from Nordea’s balance sheet. The transaction includes a broad selection of assets from Nordea’s core corporate loan book and does not target any specific sectors/geographies. Nordea will continue to service the loans.

Both English and Swedish law governed security interests were granted to support both the obligations under the CDS and the notes issued to the investors.

The securitisation has been designed to manage credit risk, gain capital relief and thus increase capital available for lending to Nordea’s customers. Nordea estimate that the transaction will shave approximately 30 basis points off the common equity Tier 1 that they are required to hold, as a share of risk-weighted assets.

Northern and central European banks, especially those in the U.K., Germany and Austria, have so far dominated the market in synthetic deals and more recently in Spain Banco Santander and CaixaBank each closed a transaction. This transaction is however a first for the Nordic region and has already piqued the interest of other potential market participants.

Nordea were advised as to Swedish law by Mannheimer Swartling with a team comprising of André Andersson, Mattias Lampe and David Tayler. Slaughter and May advised Nordea as to matters of English law.