Dutch investment bank ABN Amro has entered a partnership with the compatriot healthcare and social work pension fund PGGM, which will see the two parties share part of the risk related to the banking group's loan portfolio.
The collaboration reflects ABN Amro’s strategy to optimize its use of capital, while PGGM will gain access to an asset class that is efficient from a risk-return perspective, further diversifying PGGM’s asset allocation.
The first transaction to mark the new partnership was executed on December 8, 2006. The private deal involved ABN Amro selling part of the credit risk on its loan book to PGGM using a Collateralized Loan Obligation (CLO) structure. The CLO portfolio is currently worth around E15.5 billion. Under the transaction, PGGM shares in the credit risk of the loan portfolio by participating in the equity and mezzanine tranches of the CLO.
This is the first of what may be a number of strategic steps in our capital management, said Hugh Scott-Barrett, ABN Amro’s CFO. PGGM is our trusted partner with whom we have worked for many years. We expect to conduct a number of transactions that will offer opportunities for both of us.