(Bloomberg) -- HSBC Holdings Plc plans to issue a significant risk transfer linked to a portfolio of about €2 billion ($2.2 billion) of corporate loans, according to people familiar with the matter.
In SRTs, banks offload the risk of loan portfolios, holding on to the assets but paying investment firms to share any potential future losses. Usually, a bank would obtain default protection for as much as 15%. In return, investors receive yields that frequently top 10%.
The potential transaction is linked to a pool of European corporate loans, said the people, who asked not to be identified because the deal is private. A representative at HSBC declined to comment.
HSBC is reaching out to investors in SRTs — often configured as credit-linked notes — during what is traditionally a busy period into year-end. Among transactions, NatWest Group Plc plans an SRT linked to a portfolio of about £1.4 billion ($1.8 billion) of corporate loans, while Greece’s Piraeus Bank SA and Spain’s Banco Bilbao Vizcaya Argentaria SA are also marketing deals, Bloomberg reported last month.
Global SRT issuance is on track to reach as much as $30 billion this year, according to an estimate by Chorus Capital Management Ltd. in July. That would outpace last year’s figure of about $24 billion, the highest annual volume on record.
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