NETHERLANDS -PGGM has entered into a risk-sharing agreement with Citigroup (Citi) on a €2.5bn portfolio of emerging market credit exposures.
The transaction, which uses a collateralised loan obligation (CLO) structure, sees PGGM providing protection to Citi on the equity and junior mezzanine parts of the credit portfolio, which includes over 800 corporate credit facilities across 32 countries. The deal is set for a period of five years.
Commenting on the transaction, Mascha Canio, head of infrastructure, private equity and structured credit at PGGM, said: “It gives us access to assets that don’t normally trade in the market.
“This transaction serves as an example of the role Dutch pension funds can play in creating innovative investment solutions, especially in today’s market presenting many interesting opportunities.”
Ranjan Patwardhan, managing director, Global Portfolio Optimisation group at Citi said of the transaction’s importance to the bank: “Terra I is an important building block for our risk mitigation and capital release programme in the emerging markets. It enables us to hedge some of the credits that do not have a liquid credit default swap market available.”
The deal, named Terra 1, is the second such agreement deal entered into by the Dutch pension fund. As reported by Global Pensions, in December last year it made a similar arrangement with ABN AMRO over a €15.5bn loan portfolio.
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