Co-Founder Calls Alternative Funding Model Sorely Needed -- Lesser-Known
Lenders 'Our Nation's Best Hope'
WASHINGTON, April 29 /PRNewswire/ -- Covered Bond Investor(TM) LLC today
announced its official launch of the first-ever online publication primarily
focused on news, analysis, and resources related to the nascent U.S. covered
The publication--Covered Bond Investor(TM)
(www.coveredbondinvestor.com)--is freely accessible without charge.
"Covered bonds are sorely needed in the U.S. to help restore investor
confidence and access scarce capital funding," said Covered Bond Investor(TM)
co-founder Mercy Jimenez. "Unlike asset-backed securities, which contributed
to our current economic crisis, covered bonds cannot be sliced and diced and
played around with. In a sense, they're rather boring--and that's great."
The covered bond model of financing differs from securitization in at
least two important ways, Jimenez said. First, lenders (e.g. a bank) stay "on
the hook" to pay bondholders, so a lender has more incentive to make "good"
loans. Second, bondholders are additionally protected by a dynamic "cover
pool" of loans and other assets that can be replenished if the original loans
deteriorate for any reason.
Since going online in a beta test phase, the Covered Bond Investor(TM)
website has quietly begun attracting readers (many through Google searches or
a Wikipedia article on covered bonds). In the past few months, visitors have
accessed the site from all across the U.S.--plus 39 other countries from Peru
to Japan (principally the United Kingdom, Canada, France and Germany).
The site is designed to help visitors learn the basics about covered
bonds as well as stay abreast of new developments. Available "resource" items
include a recent article on the topic by the PricewaterhouseCoopers accounting
firm and a special update from lawyers at Morrison & Foerster.
Although Europeans have relied on covered bonds as a secure investment
for centuries, many Americans first heard of them in early 2008, when U.S.
Treasury Secretary Henry Paulson publicized their potential to help fund the
struggling home mortgage market. That push faltered as economic conditions
plunged and the biggest U.S. banks came under severe strain.
Today, Jimenez believes the best potential for U.S. covered bonds is in
funding arenas other than the government-subsidized home mortgage market--and
with "quality" lenders whose names are not so well known as the banking
"There are quality assets on the balance sheets of quality lenders that
are not being reached by federal bailout programs," Jimenez said. "Many
institutions currently are unable to access the equity markets to raise
capital, and unsecured debt is requiring wide spreads to attract investors.
For those segments, the covered bond structure presents a promising
Jimenez' perspective comes from two decades as an executive in financial
services, both in the U.S. and internationally. After earning her MBA from
the Harvard Business School, she worked for Citigroup, JPMorgan Chase, and
Her appreciation for lesser-known financial institutions came while
heading a national business center with nearly 2,000 lender relationships
across the country--large regionals as well as smaller banks and credit
"I was struck by the nobility of these institutions' conservative
underwriting and general disdain for exotic loan products," Jimenez said. "A
short while ago, the high flyers might have scoffed at their careful decisions
as 'missed opportunities'--but now the only missed opportunity is if we as a
nation do not support and reward their good behavior. Traditional, quality
lenders are our nation's best hope."
Jimenez and the other co-founder of Covered Bond
Investor(TM)--lawyer-journalist Spencer Punnett--launched the online
publication in part to make information about covered bonds more readily
available to such institutions. Although they acknowledge that not much is
visibly happening with covered bonds in the U.S. right now, they are confident
that this will change with time.
"Every quality on-balance sheet lender should explore the possibility of
covered bonds as an alternative to funding arrangements that have become
problematic in the current environment," Jimenez said.
Covered Bond Investor is the only online publication primarily focused on
news, analysis, and resources related to the nascent North American covered
bond market. It seeks to cultivate the growth of covered bonds by providing
free access to expertise that will allow more participants to explore this
alternative source of capital funding.
For further information:
For further information: Alfred King for Covered Bond Investor LLC,
+1-301-641-7888 Web Site: http://www.coveredbondinvestor.com