Cayman Islands Sees Strong Growth In Structured Finance

by Amanda Banks, Tax-News.com, London

09 February 2007

The Cayman Islands has steadily grown to become one of the world's top providers of structured finance transactions, according to the Cayman government's financial services industry promoter.

Cayman Islands financial service providers told the American Securitization Forum (ASF), held in Las Vegas last month, that structured finance transactions in the Cayman Islands tripled in three years, from 837 in 2003 to 2,512 in 2006.

"The ASF Conference, which attracted more than 6,000 securities industry attendees, was an extremely valuable one from Cayman's perspective," said Gerry Halischuk, Head of Business Development, Cayman Islands Stock Exchange (CSX). "There was a great deal of interest in the CSX, which has become one of the leading offshore exchanges for the listing of various types of structured debt offerings, including CDOs, CLOs, and related programs."

Other service providers representing the Cayman Islands at the ASF included KPMG, Maples and Calder and Walkers.

Cayman is benefiting from the overall growth of the structured finance market, particularly the increase in collateralized debt obligation (CDO) securitizations. A recent report from JP Morgan released January 2007 said that CDO securitizations in 2006 were up 64% from the year before.

In addition to growth in structured finance, consistent growth in other areas of institutional investment such as funds, captive insurance and trusts are attributable to the increasing recognition amongst global financial institutions of Cayman as a viable place to conduct business. Cayman's professional services infrastructure, its secure legal framework, its diverse and talented workforce, and its high standards of business integrity are seen as major assets to Cayman's global client base of financial institutions.

According to Sarah Cowell, partner and head of structured finance at KPMG in the Cayman Islands: "Cayman's 'edge' appears to come from the ability of global securities firms to acquire constant access to a full range of experienced professionals who can assist with both the implementation of innovative approaches to the structuring and execution of transactions and ongoing servicing requirements."

Cayman's structured finance business includes the following services:

• Financing Vehicles - The typical structured financed transaction involves a debt issue made by a Cayman Islands corporation, trust, or partnership known as a special purpose vehicle (SPV). SPVs acquire the underlying assets from the promoting financial institutions, and then convert the assets into marketable debt instruments issued by the SPV, which may comprise notes or bonds and which may be rated and listed.
• Securitizations - Financing arrangements undertaken by SPVs encompass everything from simple capital markets euro-paper issues, re-packagings, aircraft and ship financing, to more complex securitized transactions involving acquisition by the SPV of real property mortgages, credit card or other receivables, finance leases or interests in mutual funds.
• Listing Capabilities - The establishment of the CSX in 1997 greatly enhanced Cayman's securitization offering, providing Cayman SPVs an alternative to listing their securities on one or more foreign exchanges. The CSX currently has a total of approximately 1,250 listings, of which approximately 335, or just over 25%, are securitized debt offerings.

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