EuropeServicing 2006 Program Agenda

EUROPESERVICING 2006: DRAFT PROGRAMME (as of MARCH 13)

DAY 1 (MAY 31): 'THE WORLD IS NOT ENOUGH'
Servicing for CMBS, covered bonds and commercial real estate loans

****DAY 2 PROGRAM (RMBS SERVICING) STILL UNDER DEVELOPMENT****

08:00	REGISTRATION, COFFEE AND REFRESHMENTS

09:00	INTRODUCTION AND OPENING COMMENTS

09:15	FROM 'MODERN TIMES' TO 'THE MATRIX'
SESSION 1	Changing perspectives on servicing from the "originator's back office" to the "investor's front office" and the currency of information
	The European servicing sector has been undervalued and slow to develop due to the dominance of on-balance sheet funding and bundled national markets with an inherently negative perception of servicing operations as a labor-intensive and industrialized factory for portfolio administration. The drive toward integration and internationalization of European markets and the increased optimization of funding efficiencies, risk transfer and economic capital management have resulted in a gradual "unbundling" of national European markets in order to leverage the entire mortgage value chain more efficiently. This session explains why common perceptions of servicing are outdated by shifting the perspective of servicing from yesterday's "originator back office" to today's "investor front office". This perspective more accurately reflects the proactive role that servicers play in managing the informational currency that drives capital market funding. We'll start by discussing the evolution and growth of CMBS in the U.S. in contrast to the growth of European covered bonds and CMBS; explain the different functions and types of servicers that have evolved; explore how information acts as currency in secondary market transactions and how servicers acquire, process, distribute and protect that information in fulfilling their responsibilities among the various parties in capital market transactions. We will end with some challenging thoughts about why information serves as the industry's most valuable long-term asset and how much further that information can be leveraged as a strategic asset beyond traditional investor reporting and market transparency.

10:30	REFRESHMENT BREAK

10:50	'BAMBI MEETS GODZILLA'
SESSION 2	When European privacy, flexibility and innovation meet American transparency, standardization and commoditization . . . can we engineer a positive outcome?
	This session expands our discussion last year on the contrasting evolution and pace of the American CMBS vs. European CMBS and commercial real estate finance markets. The commoditization of the US market has achieved the transparency that investors expect; its standardization has enabled servicers to streamline and centralize operations to cut costs and outsource or offshore non-core functions, and the creditor-friendly American regulatory environment calls for an overt, hard-line approach toward borrowers. The complex jurisdictional nature of European markets demands innovation, flexibility and patience across multiple jurisdictions in which standardized regulations, practices and technology are only recently beginning to take shape. Furthermore, the relationship-banking and borrower-friendly regulatory environment throughout Europe requires a customized, relationship-oriented servicing approach toward borrowers that prevents scale or volume-driven approaches. The increasing numbers of American players entering European markets from the outside through Greenfield operations and joint ventures or from within as key personnel in distinctly European initiatives have raised concerns over the "Americanisation" of European real estate markets. While the context for any national market today is a global one that requires all market practices to be differentiated by those that are "local" vs. those that are "world-class", it is impossible to benchmark direct parallels between US and European markets. However, as European markets take shape, we now see how some servicers are finding the right balance between adapting best U.S. practices and applying them - where possible - to optimise European operations and the overall development of European markets. Lest Americans feel over-confident, we'll take a deeper look into covered bonds and other areas in which Europeans have a distinct advantage. Should the same impulse strike Europeans, we'll point out areas in which they are not yet fully exploiting those natural advantages and some fresh ideas on strategies that have not yet been considered as the development of loan tranching in Europe evolves.

12:00	'CATCH 22'
SESSION 3	Power, presumptions and pricing – recognizing the servicer's dilemma
	Whether captive or third-party, no one has ever said servicing was easy. In the U.S. market virtually every industry conference features a session dedicated to beating up the servicers. In Europe, servicers can't even get enough attention to be arrested. "Catch-22" refers to the frustration of double-binds and circular logic. In simple terms, no matter what the rule is, there is always an exception to it. This session explores the servicers' predicament which impacts profitability and performance across their many roles and responsibilities. In particular we will discuss what activities are considered "standard" vs. their pricing in order to separate the exceptions in which who should pay and who should perform remain unclear; current price wars among third-party providers and how any price war impacts quality; highlight new research on weighted average European servicer pricing; discuss the correlation between deal structure set up and exit strategies; show where disintermediation is occurring among key parties in new transactions and offer recommendations for creating workable service level agreements to establish clear "finish lines" in races that never seem to end.

13:00	LUNCH

14:00	'BEING THERE' VS. 'THE STUNT MAN'
SESSION 4	Differing challenges between captive and third-party servicers and their impact on pan-European market developments
	European CMBS and covered bond administration is traditionally performed by in-house or "captive" servicers with only five third-party servicers – so far - actively providing alternative solutions. While we expect the number of third-party providers to increase substantially in the next year (and perhaps by the time EuropeServicing 2006 is actually held), already the presence of such limited numbers of third-party providers has dramatically impacted European CMBS market developments on crucial issues including servicer quality, communication, Chinese walls and conflicts of interest. This session focuses on how servicer quality is impacted by ownership and responsibility across different scenarios; how market and deal structure challenges differ between third-party and captive servicers; how those differences are currently managed and how those differences will widen further with more entrants to the sector. The session will raise questions about which entities or market players will mediate, reinforce and regulate the conflicts and considerations that will arise as a result, with a response at the end of the day's programme from rating agencies, issuers, and investors.

15:20	'HEAVEN CAN WAIT'
SESSION 5	Special servicing from loss mitigation on sub-performing loans to the afterlife of non-performing loans (NPLs)
	Exceptional circumstances throughout the lifecycle of many loans drive the need for "critical care" units to diagnose and repair, remediate or dispose of loans that cannot be "nursed" back to profitability. Relaxed underwriting at origination, a downturn in the economic environment, over-optimism or a dramatic change in socio-political demographics, fraud, bankruptcy, and many other circumstances impact a borrower's inability to pay, yet the inherent value of the underlying real estate remains. This is when the value of servicing is at its highest as special servicers step in to execute strategies and systematic actions to mitigate recurring losses, workout alternative loan solutions or liquidate loans for which there are no further possibilities. In fact, almost 80% of loans that go into special servicing are eventually written off as total losses. Working against those odds requires a well-coordinated and multi-disciplinary team approach of servicing specialists who fundamentally understand the nature of real estate, particularly in markets with volumes of NPLs that exceed the internal capabilities of most banks' internal work-out facilities. We've themed this session "Heaven Can Wait" to reflect the goal of every special servicer and highlight the "afterlife" of NPLs as issuers gear up to securitise acquired NPL portfolios. During the RTC sales in the '80s that established the foundation of the American CMBS industry, tough lessons were learned about the correlation between the price paid for distressed assets and special servicing required to optimize exit strategies. Today almost all buyers of European NPLs consider special servicing their most strategic asset in anticipation of possible exit strategies before making bids on any portfolio. Italy and Germany are the most hotly contested countries for the acquisition of NPLs and feature the strongest special servicers in Europe. This session takes a look at the abundance of new special servicing operations proliferating throughout Germany, and a resurgence of NPLs in Italy, which has shown a much more proactive and practical approach to NPLs than Germany. We will focus on lessons learned in the strategies and timing of loss mitigation efforts in distressed markets and how those lessons can be applied throughout other European markets. .

16:30	REFRESHMENT BREAK

17:00	'SENSE AND SENSIBILITY'
SESSION 6	Rating agency, issuer and investor perspectives on servicer capabilities, surveillance and operational risk
	This session gives "the last word" on servicing to our panel of leading issuers, rating agencies and investors. In building confidence among all parties that appropriate risk measures are in place, we'll get an outside perspective on the progress of the servicing sector in addressing the needs and complexities of European real estate capital markets. The session also provides a response and further commentary on issues raised earlier in our session on differing challenges between captive and third-party servicers, and asks provocative questions which have no answers but clearly define the need for enhanced collaboration among all parties involved in advancing the development of European CMBS, covered bonds and commercial real estate. Specific discussion topics include: Are servicers fairly balancing the interests of all parties in transactions, and what can they do to further improve that balance? How will the combination of Basel II compliance and the massive consolidation of the European banking sector impact originators, issuers and servicers over the near term? Is there sufficient servicing capacity in Europe to manage the increasing numbers of conduits launching? Regarding the value of servicer ratings, as the complexity of European CMBS transactions increase and covered bonds now include MBS in their cover pools when can we expect ratings to become mandatory for all servicers involved in any public issuance – and who should enforce that requirement? What should be the minimum tenure for servicers to be operating successfully in a market before receiving a rating? Are current servicer ratings too broad to be effective in differentiating servicer quality? How will rating agencies or issuers look upon secondary outsourcing by servicers themselves? Under what circumstances would issuers be comfortable utilizing, and rating agencies accepting servicer advances in place of liquidity facilities? Considering the absence of back-up servicing in European CMBS and a move toward advancing, what should the minimum capital requirement be for all third-party servicers?

18.00	NETWORKING AND COCKTAIL RECEPTION (TBC)

DAY 2 PROGRAM (RMBS SERVICING) STILL UNDER DEVELOPMENT