ABN AMRO and PGGM announce agreement to share risk
ABN AMRO and Dutch healthcare and social work pension fund PGGM announce today that they have entered a partnership whereby the two parties will share part of the risk related to ABN AMRO’s loan portfolio. The partnership is a reflection of ABN AMRO’s strategy to optimise its use of capital while PGGM will gain access to an asset class that is efficient from a risk-return perspective and has the additional benefit that it further diversifies PGGM’s asset allocation.
On 8 December 2006 a first transaction was executed under the partnership. This transaction is a private version of the recent public Amstel 2006 asset securitization that is tailor-made to match PGGM’s requirements. Through this transaction ABN AMRO sells part of the credit risk on its loan book to PGGM using a Collateralised Loan Obligation structure. The CLO references a loan portfolio of EUR 15.5 billion notional. Under the transaction PGGM shares in the credit risk of the loan portfolio by participating in the Equity and Mezzanine tranches of the CLO.
“This is the first of what may be a number of strategic steps in our capital management,” said Hugh Scott-Barrett, ABN AMRO’s Chief Financial Officer. “PGGM is our trusted partner with whom we have worked for many years. We expect to conduct a number of transactions that will offer opportunities for both of us.”
Piet Roelandt, Director Portfolio Management at PGGM: “This transaction reinforces the Netherlands’ role in creating innovative investment solutions for pension funds. For us, this is an effective way of investing in a loan market which thus far has been difficult to access through the public markets in a size that is meaningful for PGGM. This deal helps to achieve our goal of having a better diversified overall portfolio. Being closely involved in the structuring of the transaction allows us to optimise these effects. We are impressed by the quality of ABN AMRO’s internal credit appraisal processes and see this as a next step in an already longstanding and strategic relationship between our two companies.”
The agreement to transfer part of the risk of ABN AMRO’s loan portfolio should also been seen against the backdrop of a history of transactions in which ABN AMRO has successfully securitised parts of its loan portfolio. The objective of such transactions is to enhance ABN AMRO’s capital management capabilities and allow for an optimal capital deployment strategy. Individual transactions under the partnership with PGGM will initially be structured so that they are efficient under Basel I and Basel II.