Signing ceremony. Credit: Michal Radwanski

We have advised on Inbank AS’s (“Inbank”) inaugural green supranational synthetic significant risk transfer (SRT) securitisation, valued at 635 million zł (150 million EUR), in collaboration with the European Investment Fund and the European Investment Bank Group. This transaction, backed by solar panel loans, is the first of its kind for an Estonian bank and sets a new benchmark in the ESG sector.

Client Challenge

• Alvarez & Marsal (A&M) was retained by Inbank, a pan-European bank founded in 2010 and headquartered in Estonia, to advise on its inaugural SRT.
• Inbank is a consumer lender active in five European markets, specialising in technology-driven merchant solutions to originate hire purchase, BNPL, auto, green finance, rental services, and direct lending contracts.
• A&M was selected based on a range of factors, including a differentiated advisory and full-service securitisation-arranging offering, incorporating all elements required by the client.
• An assessment of Inbank’s balance sheet concluded that the portfolio characteristics of the Polish consumer solar panel portfolio offered the highest capacity for an optimal execution.
• Inbank’s goal was to establish itself in the securitisation market through a capital relief transaction that optimises capital efficiency.
• Given the innovative nature of the transaction, Inbank encountered several challenges, including:
  • Selecting an optimal transaction structure and format.
  • Gauging market interest.
  • Preparing for the due diligence process.
  • Ensuring competitive pricing and smooth execution.
  • Navigating regulatory discussions.
  • Addressing specific risk appetites.

A&M’s Solution and Approach

• A business and portfolio assessment process was used to help drive decisions on transaction format, selection of prospective financing partners and all ramifications.
• By combining funded and unfunded SRT potential partners, the transaction format and the portfolio criteria achieved every required goal.
• The executed transaction was a three-tranche structure supplemented by synthetic excess spread, whereby Inbank retained the first loss tranche and EIF guaranteed the mezzanine and a combination of both EIF and EIB provided credit protection against the senior tranche.
• In return for the credit protection, Inbank has executed a retrocession agreement with the EIF and EIB, stipulating to redeploy the released capital to new Green loans.
• The final transaction represents the culmination of a comprehensive transformation journey for a company that had never issued a securitisation before into one with a market-leading securitisation product suite.

Many Transaction Firsts

• The transaction was the first securitisation by an Estonian bank and first SRT supervisory discussion with the local regulator, the Estonian Financial Supervision and Resolution Authority (EFSRA).
• First green Polish securitisation for the European Investment Fund.
• Inaugural synthetic securitisation backed by solar panel loans to private individuals.

A&M worked closely with the company’s teams:

• Ensuring adherence to requirements driven by regulation as well as best practice in the market.
• This complex and unusual transaction illustrates the benefits of an adviser who brings both wide investor contacts and deep understanding of their specific risk appetites.

Quote from the Client

• “Inbank sought an arranger with a strong track record, prior experience in Central and Eastern Europe, and the expertise to guide the bank through the complexities of the SRT landscape. A&M’s professional yet practical approach ensured Inbank was thoroughly prepared at every stage, leading to a timely transaction close that met the anticipated economic outcomes.” Ivar Pae, Head of Balance Sheet Management, Inbank

Quote from A&M

• “We are delighted to have been able to work with Inbank on this exciting transaction, which as an inaugural synthetic securitisation of green loans is an important milestone in securitisation for Inbank itself, Estonia and the entire ESG sector.” Robert Bradbury, Head of Structured Credit