Karson and BNY Mellon Collaborate on Innovative Capital Financing Transaction
First K-Note Transaction in Canada
Hamilton, Bermuda, January 19, 2016 – Karson Management (Bermuda) Limited and affiliates (Karson), a provider of reserve, capital and collateral financing solutions, and BNY Mellon, a global leader in investment management and investment services, today announced the successful completion of the first K-Note reinsurance collateral financing transaction in Canada. The patented K-Note financing platform has been designed by Karson around a number of BNY Mellon’s corporate trust, custody and collateral management services.
The multi-million Canadian dollar transaction involved the issuance and deposit of a K-Note into a reinsurance security arrangement (RSA) account designed to meet the requirements of the Canadian regulator, the Office of the Superintendent of Financial Institutions (OSFI). The K-Note is backed by a payment obligation of a third-party financial institution and a portfolio of investment assets.
Derrell Hendrix, CEO of Karson, said: “We are pleased to have concluded this first of what we hope to be many Canadian reserve financing transactions based on clear guidance from the Canadian regulator. The Karson program has again successfully transformed its access to market capacity into the issuance of an instrument, a K-Note, that satisfied our client’s reinsurance collateral financing need. We have been able to meet a very challenging client requirement while continuing to develop a scalable and sustainable execution platform with our partners at BNY Mellon.”
BNY Mellon is Karson’s service partner of choice and its London service team was appointed in 2009 for the forerunners to this new transaction.
“With the influx of new regulations there is a continual need to scrutinise effective ways of meeting capital adequacy requirements,” said Dean Fletcher, head of Corporate Trust EMEA at BNY Mellon. “This is a landmark transaction and will provide a template for us to work with Karson to help their clients navigate the new regulatory landscape following the financial crisis.”
Having completed a number of K-Note transactions in the U.S. between 2009 and 2011, Karson ensured the K-Notes continued to meet OSFI requirements following subsequent revisions to capital requirements for Canadian insurance and reinsurance companies. Under the transaction, the K-Note was rated by both Standard & Poor’s and DBRS.
Notes to editors:
Karson is a specialist financial solutions structuring firm established in 2007 to provide an alternative approach (e.g. capital-markets-funded) for financing “qualifying collateral” and “admitted assets” for major financial institutions.
To date, Karson has completed 16 K-Note transactions with $8.2 billion in reserve collateral and capital financing capacity raised on behalf of its clients. While Karson remains very committed to its roots in the reserve financing space, it has expanded its platform capabilities to address financing needs for derivatives collateral, liquidity transactions and contingent capital requirements worldwide. Karson is currently launching a unique asset reclassification and loan transformation platform which will allow clients to convert illiquid assets and loans into a tri-party eligible security that can be used for liquidity financing purposes and general collateral applications.
The Karson platform offers a unique blend of client-focused deal flexibility within an effective, scalable and efficient execution framework. This indirectly provides clients with access to an expanded range of capacity providers, as well as the cost and price efficiencies of a standardized legal and operating platform.
BNY Mellon is a leading provider of corporate trust services to the debt capital markets, offering customized and market-driven solutions to investors, bondholders and lenders. As of September 30, 2015, BNY Mellon Corporate Trust served as trustee and/or paying agent on more than 60,000 debt-related issues globally. The corporate trust business utilizes its global footprint and expertise to deliver a full range of issuer and related investor services including trustee, paying agency, fiduciary, escrow, and other financial services. The business administers a wide array of assets and types of programs to multinational corporations, financial institutions, governments and their agencies, and the banking, securities, and insurance industries.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of September 30, 2015, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).