(This article appears courtesy of International Financial Law Review, sign up for a free trial here)
There can be little doubt that within the Middle East, banking and capital market transactions are now a well-accepted method of funding for both the commercial and retail sectors. International and domestic banks have spent the last few years busily arranging both domestic and international capital market transactions for both domestic and international investors.
As the market has developed, a frequent question has been when the first true securitization will occur in the region. In other emerging markets as banking and capital market transactions became more sophisticated, the natural leap to a securitization often occurred. So will that occur in the Middle East, and if so, in what form?
Wait, hasn't one already happened?
Of course, some readers will be familiar with the ENSEC Home Finance Pool I transaction, a securitization that closed in May 2005. Those same readers will surely ask why that transaction is not considered by the author as the first Middle East securitization. The answer is simply that the transaction had some of the features of a typical securitization, yet the nature of its fully cash collateralized obligations (and thus a AAA / Aaa rating) did not test whether a securitization in its traditional western European form could work from a legal perspective.