around a mound of stones, post-recession equipment securitizations began in 2010 and by 2013 reached record-setting issuance amounts. Last year saw 23 equipment deals and four new securitizers. But stones in the form of federal regulations continue to gather, posing new challenges for both issuers and investors. As of mid-June this year, no new issuers had come forth, and according to Harrison Scott Publications’ Asset-Backed Alert newsletter, 12 equipment lease-and/or loan-backed trans-actions had been registered in the United States. Thus the question: Is securitization here to stay, or will this funding method be choked off by outside forces? Among the mandates already imposed or now in process: ● ● SEC ● ● CFTC (Commodity Futures Trading Commission) Rule HERE THERE IS A WILL , so often there is a way. Like stream water trickling on Interest-Rate Swaps for Clearing Requirement , pro-posed June 2016, which would require, if implemented, that certain interest-rate swaps be submitted for clearing to a derivatives-clearing organization. Compliance Happens Mike Herzberger, Treasurer of GreatAmerica Financial Ser-vices in Cedar Rapids, Iowa, says his firm is monitoring the proposed rules on interest-rate swap clearing. “This is very much an issue in the securitization warehouse marketplace,” he says. “It’s not that we can’t comply, but it’s another rule being implemented that will undoubtedly increase the cost of securitization for GreatAmerica with little or no value-adds, from my perspective.” For Herzberger, the broader issue is that equipment ABS [the asset-backed securities market] was so solid throughout the Great Recession. “To my knowledge no equipment ABS transaction ever got into trouble during the last recession, as contrasted to other asset types,” he says. “Equipment se-curitizations are getting caught up in all these new rules.” Evan Wilkoff, Executive Vice President of Capital Mar-kets for Ascentium Capital LLC in Charlotte, North Caro-lina, says his firm is monitoring regulators’ consideration of another rule that would require additional collateral disclo-sures for broadly distributed private offerings. Rule 17g-5 , effective June 2015, which requires issu-ers, sponsors or underwriters of structured finance to post on a secure website any third-party due-diligence reviews and disclosures; ● ● SEC Rule 17g-7 , effective June 2015, requiring rating agen-cies to compare representations/warranties offered in a specific transaction to comparable transactions; ● ● SEC Regulation RR (Risk Retention) , effective Dec. 24, 2016, for nonmortgage-backed securities, requiring issuers or sponsors to retain at least 5% of the credit risk for assets that are conveyed; securitizers to disclose fulfilled and unfulfilled repurchase requests on a quarterly basis (or annually if no repurchase activity); and ● ● SEC Rule 15ga-1 , in effect for several years now, requiring SECURIT New rules add obstacles to securitizing. Will issuers get by unscathed? BY SUSAN L . HODGES 28 JULY/AUGUST/SEPTEMBER 2016 EQUIPMENT LEASING & FINANCE MAGAZINE JULIJA SAPIC / 123RF / ISTOCK