Re-Emerging and Esoteric Asset Classes: Questions and Answers

Abstract

This is a summary in question and answer format of a panel discussion on re-emerging and esoteric asset classes. Most esoteric asset-backed securities (ABS) asset classes continued to perform well through the financial crisis. There has been a massive return of liquidity to the esoteric ABS sector. The absence of monolines has required investors to do their own homework on deals and has generally translated into relatively smaller deal sizes, although deals in the $750 million to $1 billion range are still possible. Many deals are getting done without an initial rating but with a provision for a rating post-closing. Ratings are still required for larger deals with wider distribution requirements. The time to market is somewhat longer than prior to meltdown. Esoteric ABS are becoming the gold standard for ABS best practices. The bespoke nature of esoteric ABS has proven a strength rather than a weakness by requiring close scrutiny by the rating agencies and investors.