GLOBAL - PGGM, the asset manager to the €86.3bn Dutch healthcare pension fund PFZW, has extended its structured credit investment strategy and signed to a $2.5bn (€1.8bn) trade finance agreement with Standard Chartered Bank (SCB) on some of its loans business.
Under the new collateral loan obligation (CLO) arrangement, known as Shangren, PGGM will tap into SCB's trade finance business and deliver credit protection at an equity and mezzanine level, through a CLO, to a diversified portfolio of trade finance credit exposures.
More specifically, the portfolio contains 1600 of SCB's customers based in 30 countries and is said to see SBC co-invest with PGGM in the ‘equity' portion of the transaction but allow SBC to retain the full amount of the senior tranche.
This is another string to PGGM's structured credit strategies as the group, acting on behalf of the pension fund, has previously invested in concepts such as catastrophe bonds and other unusual risk arrangements, in a bid to diversify its portfolio.
That said, it is not the first such deal as PGGM signed an agreement with Abn Amro in February this year to securitise some of its Brazilian debt. (See earlier IPE story: PGGM signs second loan deal with Abn Amro)
This latest deal is likely to have done to improve Standard's own balance sheet and free up some capital by sharing some of the risk of its credit business.
Officials for both parties said the assets are sourced from the bank's balance sheet and "have gone through rigorous internal credit processes" at Standard Chartered.
CLOs are often considered a controversial concept as they tend to invest in high-yielding, but therefore high-risk, debt in emerging market countries.
But Raymond van Wersch, senior portfolio manager of Structured Credit at PGGM, said the asset manager feels the deal with SCB is a good strategy and with the environmental and social governance coverage it is looking for.
"Shangren offers us a unique opportunity to invest in a new asset class that is difficult to find in the public market. The portfolio is well-diversified and Shangren's attractive risk-return characteristics represent a valuable addition to our continuously growing structured credit portfolio as well as the overall portfolio."
He continued: "Standard Chartered's long-standing commitment and expertise in emerging markets made it a natural choice for us. The fact that both institutions demonstrate high environmental and social awareness throughout their businesses was also a key factor for PGGM."
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