The EBN Group has set up the first uncollateralised bad debt (NPL) securitisation fund, whose securities are marketed in Spain in the form of a five-year bond, it announced.

EBN Titulización SAU, with advice from EBN Capital SGIIC, has set up ‘NPLs Unsecured Fondo de Titulización’. A first compartment will pay a coupon of 7.5% per annum semi-annually and will additionally repay 7.5% of the principal from the first year. The fund also provides for a series of additional kickers, giving the vehicle a resulting IRR ranging from 8% to 14%, depending on the date of full repayment.

EBN pointed out that Spain is, after France, “the great source of unsecured NPL portfolios in Europe, from which foreign funds that have been buying large portfolios of this type, mainly from the banking sector, have been drinking from it for years”.

With this vehicle, EBN Titulización is the first Spanish entity to manage a securitisation fund of unsecured NPLs, whose securities are offered to qualified Spanish investors, a type of financial asset that until now has been reserved mainly for large funds, and which is very common in other European countries, but that has little or no presence in investors’ portfolios in Spain.

“The ‘NPL unsecured’ is, contrary to what it seems, an asset that is very decorrelated to the economic cycle, being very attractive in the current situation. It has the advantage that its recovery follows highly predictable behavioural patterns, which reinforces its securitisation in bond format”, said Silvia Bonales, Managing Director of EBN Titulización.

EBN Capital’s Director of Business Development, Enrique Castañeda, added that “this is an innovative proposal in line with the fund manager’s DNA”, to provide clients with “sources of true diversification and access to the best risk-return ratio”.

Original Story: Europa Press | News 
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Edition and translation: Prime Yield