ABN AMRO announces jumbo SME loan securitisation

ABN AMRO announces SMILE 2005 – a EUR 6.75 billion fully-funded synthetic securitisation backed by loans to Dutch small-to-medium enterprises (SME). It is the largest-ever Continental European SME securitisation and is being jointly lead-managed by ABN AMRO and Credit Suisse First Boston.

“This transaction, in conjunction with Shield 1, is part of our ongoing capital management programme. The objective is to use our assets better in order to support our strategic growth,” said Tom De Swaan, CFO of ABN AMRO.

SMILE 2005 is the second SME securitisation from ABN AMRO and follows SMILE 2001, which outperformed with a low cumulative default rate of 0.82 per cent and a high weighted average recovery rate of 81 per cent.

SMILE 2005 uses a synthetic structure comprising the risk transfer of EUR 6.75 billion of SME loans via a credit-default swap (CDS) with special purpose vehicle (SPV), Smile 2005 Synthetic B.V. The SPV will then hedge this exposure through issuance of six classes of credit-linked notes (CLN), the proceeds of which will be transferred to a cash deposit held by ABN AMRO (full transaction structure is detailed in notes to editors).

The structurers were able to avoid the need for a first-loss tranche, due to the high quality of the reference loan portfolio and strong structural features of the transaction. As such it perfectly matches ABN AMRO’s objectives.

The CLNs will be structured as follows:

“The high-quality reference portfolio of loans makes Smile 2005 Synthetic an attractive issue for investors,” said the joint-lead managers.

ABN AMRO is rated AA- by Standard and Poor’s and Fitch and Aa3 by Moody’s Investor Services.