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Funds Created to Offload Credit Risk From Big Projects 

January 23, 2014
Jenny Anderson, the New York Times

The Mariner Investment Group, a $10 billion global alternative investment firm, has created two funds that will buy up credit risk from deals used to finance large projects in areas like infrastructure, transportation and energy, allowing financial institutions, including European banks, to free up capital they would otherwise need to hold under regulatory requirements.

At the same time that Mariner announced the creation of the two funds, worth a total of $450 million, it closed its first such deal. UniCredit, the largest bank in Italy by assets, sold default risk on a 910 million euro portfolio of loans for energy and infrastructure projects to Mariner. Mariner bought that risk with credit-linked notes — a kind of credit derivative.

The notes effectively free UniCredit from holding large amounts of capital against potential risk from the loans. In an ideal world, UniCredit could then use that money to increase lending, which is in short supply in Europe. It could also use the capital to protect against other assets on its balance sheet.

Read more: The New York Times

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