Synthetic securitisation has become an increasingly important tool for European banks seeking to optimise capital efficiency while expanding lending capacity to priority sectors such as small and medium-sized enterprises (SMEs). For institutions entering the securitisation market for the first time, structuring a debut transaction requires careful portfolio selection, alignment with investors and development finance institutions, and robust structuring expertise.

Bigbank, a pan-European bank founded in 1992 and headquartered in Estonia, sought to execute its inaugural Significant Risk Transfer (SRT) transaction as part of its broader capital management strategy. A&M advised the bank on the transaction, helping it successfully enter the securitisation market and structure a capital relief solution aligned with its growth ambitions.

Bigbank is a digital credit institution specialising in consumer and SME loans. The bank is active across nine European markets, with a group loan book in excess of €2bn.

An assessment of Bigbank’s balance sheet assets concluded that a diversified portfolio of loans, credit lines and leases contained the characteristics that offered the highest capacity for an optimal execution.

Client Challenge

• Bigbank aimed to enter the securitisation market with a strategic capital relief transaction designed to maximise capital efficiency.
  The transaction was the first securitisation by Bigbank, representing a significant evolution in its capital management and risk-sharing capabilities.
• Navigating the complexities of a debut issuance required an advisor capable of managing the entire lifecycle—from initial portfolio stratification and structural modelling to the negotiation of complex retrocession agreements with multilateral development banks.
• This transaction is uniquely pan-Baltic, covering Estonia, Latvia and Lithuania.

A&M’s Solution and Approach

• Through a comprehensive business and portfolio assessment, we identified the optimal transaction format and prospective financing partners while evaluating all structural considerations.
• The final transaction featured a three-tranche structure enhanced by synthetic excess spread. Under this arrangement, Bigbank retained the first-loss tranche, while the EIF guaranteed the mezzanine layer. Credit protection for the senior tranche was provided through a joint guarantee from both the EIF and EIB.
• In exchange for credit protection, Bigbank partnered with the EIF and EIB through a retrocession agreement, pledging to use the freed-up capital to support new loans for SMEs and mid-caps.
• This deal represents a milestone in Bigbank’s evolution, successfully transitioning the firm from its debut issuance to a position of market leadership in securitisation products.
• The Bigbank transaction now represents the third transaction executed by the EIB Group in Estonia.
• This complex and unusual transaction illustrates the benefits of an advisor who brings both wide investor contacts and a deep understanding of their specific risk appetites.

Quote from Client:

“This first synthetic securitisation transaction is an important milestone for Bigbank. It helps to finance small and medium-sized enterprises in all the Baltic countries with better pricing terms. Together with the European Investment Bank Group we are helping Estonian, Latvian and Lithuanian businesses to grow and fulfil their plans which need affordable financing”. - Argo Kiltsmann, CFO of Bigbank

Quote from A&M:

“It was a privilege to have worked for the first time with Bigbank and again with EIB/EIF on this transaction. This represents both the first SRT for Bigbank but also another milestone in the continued development of synthetic securitisation in Estonia, demonstrating the important role that the technology has in unlocking SME and ESG finance for the region as well as the appeal of the Baltics for growth in securitisation more generally”.- Robert Bradbury, Head of Structured Credit

Bigbank’s inaugural synthetic securitisation represents an important step in the continued development of the securitisation market in the Baltic region. By combining a carefully structured reference portfolio with the support of the European Investment Bank Group, the transaction demonstrates how synthetic risk transfer structures can improve capital efficiency while unlocking additional financing for SMEs across Estonia, Latvia and Lithuania.

A&M advises financial institutions, investors and development finance partners on the full lifecycle of securitisation and capital relief transactions, from portfolio analytics and structuring to execution and investor engagement.