6/29/2026
Good morning, I wonder how many of you spent the weekend like me, catching up on a bunch of things you’d been unable to complete because your brain had been melted by the sun? The UK and much of Europe experienced sweltering temperatures last week, a serious reminder of just how important tackling climate change will be in the coming years.
It’s probably apt then that we focus on the announcement last week by the European Investment Fund as it helped Banco Sabadell release €1bn into SME financing, with €71.5m earmarked for green projects and up to €164m for defense and security financing.
Back in May, Banco Sabadell largely pre-placed its €1bn STS Consumer ABS, Sabadell Consumo 4 FT. What we didn’t know then was that of the €855m Class A’s, €362.5 million came from the EU, with €312.5 million from the European Investment Bank (EIB) and €50 million from the EIF.
As part of the investment from the EIB and EIF, Banco Sabadell is obligated to use this financing for green and defense-related SMEs (although there will be no direct investment in weapons or ammunition). Think more along the lines of barracks, airport runways, cybersecurity and so on. Sabadell Consumo 4 FT itself has no green or ESG credentials, so this is in effect a variation on the idea of a use-of-proceeds transaction.
I maintain that I’m no longer a journalist these days, but with such an interesting story, I did manage to get ahold of Georgi Stoev, Head of Securitisation at the EIF and Ricardo Garcia Carmona, a senior investment manager at the Fund.
“This is all about the clear argument of increasing the velocity of capital, recycling and re-channeling capital,” said Stoev in what is being described as the first of its kind transaction. “There’s less value in the EIF dealing in a securitization portfolio of EV leases. It’s just suboptimal – those loans have already been granted. But instead, if we securitise the diesel cars… we can channel that investment lending into green lending. And the same is true of defense.”
The EIB and EIF are the EU’s financing arm, and one of their roles is to invest in projects that support the EU’s policy objectives including climate action, technological innovation, security and defence, territorial cohesion, agriculture, and social infrastructure.
In recent years, the EIF has also been trying to show how securitization itself can be of benefit to the EU, and a key component of that argument is that it can lead directly support funding for the real economy and SMEs. This deal then, is not without political significance either.
“It’s a great example of how securitization can serve multiple purposes at once, because I think everybody benefits from this,” Carmona added. “The real economy and we as the EIF are able to continue supporting the EU’s policy goals.”
There is also a certain irony here. In trying to build more mainstream support for securitization, one of the clearest public-interest use cases now being put forward is funding for security and defence companies. For a market still working to shake off some of its post-crisis baggage nearly 20 years after the fact, it is a reminder of how quickly the politics around both topics has shifted.
It will also be interesting to see how this develops longer term. Stoev certainly thinks it could almost become an asset class in its own right. “I think something else could be brewing here,” he said, “including on the green side of things.”
“As more and more of these loans are being originated, it becomes likely that those loans themselves will start being securitized. And so the question is how do we look at those? Do we look at it as just another concentrated industry? Does it give rise to new rating methodologies? Could a new asset class be emerging?“
For now, we’ll have to wait and see, but it’s always nice to see some positive news about the industry.
Read the full press release from the EU here.
Back to the primary market and it was a busy week in euros and sterling with seven deals pricing, five of those fully offered. There was also a good deal of variation, with no German autos to dominate proceedings.
Instead, on the euro side we had a French Prime RMBS and Consumer ABS, an Italian Consumer ABS reoffered by Mediobanca, and a privately marketed CMBS from Morgan Stanley’s ELoC shelf. On the sterling side there was a BTL RMBS, equipment lease deal and a Credit Card ABS.
However, as we’ve touched upon in recent weeks, investor demand is now clearly on the wane – particularly at the triple-A level. With generally much larger tranche sizes, it’s to be expected that any slow down starts at the seniors, but it really is getting quite abrupt.
Paratus’ UK BTL RMBS, the £504.8m Twin Bridges would have likely been eyeing up the low-80s on its triple-As, but instead priced 1bps wide of the recent Hops Hill 6 deal at 86bps over Sonia. To counteract that, they went for size over spread and upsized from £400m to £504.8m. The Credit Card ABS from Newday’s eponymous master shelf could only get its £254.4m Class A tranche 1.3x covered – but did just about manage to tighten to a solid level at 83bps over Sonia. Finally, Hermitage 2026 – the Equipment Lease ABS from Haydock Finance did okay with 1.6x coverage.
In Euros, it was more a case of feast or famine. Younited Credit’s €202.4m Youni France 2026-1, the issuer’s debut in French Consumer ABS, had €347m of unfulfilled demand.
However, Carnoon Bay Capital (a subsidiary of Rothesay) struggled in its newly established master trust structure backed by €3.8bn of prime French home loans (originally purchased from HSBC Continental Europe). IPTs were pragmatic at 65bps over 3-month Euribor, offering an 8bps pickup versus the most recent French Prime RMBS from Credit Agricole’s Habitat shelf. But momentum was nowhere to be found and in the end they printed at 70bps, a full 13bps pickup versus Habitat.
Why are we seeing this? Quite simply, there’s been a hell of a lot of issuance this year.
Euro-denominated Prime RMBS volume is on track to be the highest since 2018, while if euros Consumer and Auto continue at this pace, they will both break their post-GFC records for marketed volume. Sterling is not booming to quite the same extent, yet still there’s been around £12bn of offered paper in Q2, again one of the busiest quarters in the post-GFC era.
A little breather as the summer holidays approach is surely no major cause for concern.
For the full detail on all of these deals, including deal commentary, login at Concept ABS or request a trial here.
That’s all from me this week. Pray for the quality of this newsletter should England be through to the last 16… Kick off for that round would be 1am next Monday.
Have a great week,
Tom
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