Contents

ABS

Refi SLABS seeing product, borrower expansion

Refinanced student loan ABS (SLABS) has grown to become a defined sector within student lending, making up a third of total US SLABS volume. With this growth, lenders are expanding across a range of measures - including loan and borrower type - and new competitors continue to enter the space.

The broader SLABS sector has been a high point of the US consumer ABS market, with new issuance volumes of US$7.9bn in 1H17, a year-on-year increase of 11%. Of this, refi student lenders contributed 29% - representing a 30% YOY increase - while total dollar volume for private student lenders fell by 54%.

Jon Riber, svp at DBRS, comments that refinanced student lending has "definitely become its own large sector within student lending" and says it is "likely that it will continue to grow for some time." He notes that the rating agency has rated approximately US$11bn of securities backed by student loan refi collateral.

The driving force is largely that existing FFELP loans generally have a fixed rate of up to 8.5%. He adds: "The interest rate on federal student loans does not reflect a borrower's credit quality, as such loans are not credit underwritten. Refi lenders spotted an opportunity to refinance these federal loans to a lower interest that reflects a borrower's credit quality."

To emphasise the benefits of refinancing, Riber points out: "The average refinanced rate varies, but the last SoFi transaction we rated has an average fixed rate of 5.59%. The last Laurel Road deal we rated has an average rate of 5.32%."

The main downsides of this are, however, that borrowers lose certain benefits offered by federal student loan programmes - such as income-based repayments (although those with higher income and free cashflow wouldn't qualify for income-based repayment).

Riber says that with the growth of the sector, so there has been an expansion of product and borrower types. "There has been a general expansion across school and degree types. SoFi and CommonBond first started off mainly providing loans to borrowers with MBA degrees from top tier schools, but that has changed."

He continues: "For example, in the first Sofi deal, 70% of the collateral represented borrowers with MBA degrees. SoFi's past several deals include less than 10% MBA loans. Lenders have also been increasing their originations to borrowers with only undergraduate degrees. Recent transactions, for example, have included about 25% undergraduate loans - an increasing trend."

Alongside this, firms have amended their approach, so they are lending to a broader range of borrowers based on more traditional credit metrics. Therefore, according to Riber, lenders focus less on school type and degree type and more on ability to repay based on measures like free cashflow, credit score and years of work experience.

Laurel Road, the online lending arm of Darien Rowayton Bank, typically lends to very highly skilled professionals in the medical field. For this firm, traditional measures are more important when looking at ability to repay than where they were educated.

Noah Cooper, director, capital markets at the firm, says: "Typically, we don't focus too heavily on the school a borrower went to, but more on their credit history and ability to repay based on those metrics. We lend to a wide range of highly trained professionals and degree types, but they still have to have strong credit profiles."

Similarly, while Laurel Road may be an online extension of DRB, Alyssa Schaefer, chief marketing officer at Laurel Road, comments that the firm is still rooted in the heritage of a bank, with "all the assurances and regulatory compliance that entails." Cooper adds that the firm therefore has stuck to "traditional measures, such as FICO, debt-to-income and free cashflow."

Riber notes that loan types are being expanded to include a wider range of offerings, such as Parent PLUS loans - a growing sector ripe for refinancing. He suggests it makes sense for them to be refinanced, as parents often have a solid credit history and yet are also on a high fixed rate.

Laurel Road recognises the opportunity here too and is also seeking to expand outside of just consumer loans. Shaefaer adds: "We already offer refinancing of Parent PLUS loans, along with MBA loans to those currently attending business school, as well as other loan types. Looking ahead, we want to build meaningful relationships with our customers and are exploring longer-term loan products, like mortgages."

With the growth of the sector, more competitors are entering the space and Riber suggests that lenders could come from more traditional bases too, albeit new players may struggle to profit. He says: "In terms of new lenders, I have seen several new refi lenders enter the space and the trend seems to be continuing. Further, many state agencies - which, in many cases, have been struggling due to the discontinuation of FFELP - have rolled out new refi programmes."

He adds: "Because the refi market generally seems to be a low margin business with a considerable amount of competition, I feel it will be difficult for most new lenders to achieve the origination volumes necessary to achieve a level of profitability that is sustainable."

There may be some concerns over the fact that the US is entering a rising rate environment, which could put pressure on borrowers to meet repayments. Currently, however, the consensus is that a rise in defaults in the refi SLABS sector is low.

Cooper elaborates: "I think overall the refinanced student loan space will fare well in a downturn. While defaults may tick up, many lenders - including Laurel Road - offer refinanced loans to highly trained professionals that should remain resilient in an adverse credit environment or in an economic downturn."

Riber adds that he also hasn't seen any trends towards worsening credit quality, but in fact the opposite may be true. He concludes: "I've not seen any deterioration so far in terms of increased defaults and credit quality actually seems to be getting better in some cases. There has actually been a trend of increasing free cashflow in refi SLABS."

RB

ABS

Innovative ILS coverage offered

The IBRD has priced a series of catastrophe bonds that will provide the Mexican Fund for Natural Disasters (FONDEN) with innovative parametric coverage of up to US$360m. The ILS were issued across three tranches with exposure to three types of disasters - earthquakes (CAR 113 notes), Atlantic tropical cyclones (CAR 114) and Pacific tropical cyclones (CAR 115).

The three-year bonds were issued under IBRD's capital at risk notes programme, which transfers risks related to natural disasters or pandemics from developing countries to the capital markets. The US$150m CAR 113, US$100m CAR 114 and US$110m CAR 115 notes priced at six-month Libor plus 412bp, 892bp and 552bp respectively. Modelled attachment probability and expected loss are 5.73% and 3.43% for the CAR 113 notes, 7.97% and 5.56% for the CAR 114 notes, and 5.8% and 3.96% for the CAR 115 notes.

The geographic spread of investors for the CAR 113 notes was 45% based in Western Europe, 24% in North America, 23% in Bermuda and 8% in Asia Pacific. In terms of investor type, 78% were dedicated ILS investors, 19% were asset managers and 2% were reinsurers.

Geographic spread for the CAR 114 notes was 38% North America, 37% Western Europe, 16% Bermuda and 9% Asia Pacific, while for the CAR 115 notes it was 46% Western Europe, 25% North America, 22% Bermuda and 7% Asia Pacific. Dedicated ILS investors again accounted for the majority of investors in both tranches (69% and 60% respectively), with asset managers (24% and 23%), reinsurers (4% and 16%) and life insurers (3% and 1%) making up the remainder.

Pay-outs will be triggered when an earthquake or tropical cyclone meets the parametric criteria for location and severity set forth in the bond terms. Different levels of pay-out are possible - from 25% to 100% - depending on where and how powerfully a peril hits. The aim is to offer the maximum level of protection to the areas with greatest exposure.

The pay-outs will be passed on by the IBRD to FONDEN through the intermediation of Munich Re and Agroasemex. GC Securities was sole bookrunner for the transaction and acted as joint structuring agent and joint manager with Munich Re.

The Mexican government is one of the most experienced governments in catastrophe risk management, according to the World Bank. Nearly one-third of Mexico's population lives in areas that are exposed to hurricanes, storms, floods, earthquakes and volcanic eruptions. In economic terms, this translates into 71% of the country's GDP considered to be at risk from two or more natural hazards.

Oscar Vela, head of insurance, pensions and social security at Mexico's Ministry of Finance, comments: "Over the past 10 years, Mexico has built and expanded a long-term strategy for catastrophic risk management. This policy has the key objective of creating financial mechanisms to mitigate and stabilise the impact of natural disasters on fiscal accounts. The Mexican government remains committed to promoting policies that transfer risk to the capital markets, so that we can jointly create deeper markets and better diversification opportunities, foster better fiscal policy management and support socially responsible initiatives."

CS

ABS

Cat bond issued in blockchain first

Solidum Re has launched what is believed to be the first-ever catastrophe bond to have been digitised on a private blockchain. Named the ILSBlockchain, this mechanism has replaced the role of a traditional settlement system for the note issuance.

Cedric Edmonds, director of Solidum Re, notes that an alternative to Euroclear was required as it is becoming increasingly difficult to access traditional settlement systems efficiently for smaller private placement note issues. "It was a case of necessity being the mother of invention," he adds.

The U$14.8m private placement - dubbed Dom Re IC - was issued via a Guernsey-domiciled ILS reinsurance transformer and incorporated cell of Solidum Re (Guernsey) ICC. The underlying reinsurance contract, with an unnamed ceding company, is exposed to US wind risk. Six investors subscribed to the notes, which have an indemnity trigger and are due in 2023.

Solidum Re acts as the paying agent and common depository, as well as the blockchain permission grantor and blockchain sponsor. Artex Risk Services (Guernsey) acts as trustee.

On the issue date, Solidum Re created cryptographically-certificated notes on the ILSBlockchain and then the investors were able to execute - peer-to-peer with the paying agent - delivery-versus-payment transactions on the blockchain to purchase the newly created notes. Investors now hold their notes, cryptographically confirmed, on the ILSBlockchain.

Secondary market participants can join the ILSBlockchain and execute direct peer-to-peer delivery-versus-payment transactions to buy or sell notes. Equally, broker-dealers can join the ILSBlockchain in order to intermediate trades between other participants.

Mark Helyar, non-executive director of Solidum Re and of counsel at Bedell Cristin, expects this model to be widely adopted. "It is not an exaggeration to describe the new Dom Re IC structure as a ground-breaking global first - not only for the ILS sector, but for dematerialisation of listed securities generally," he concludes.

CS

ABS

Subprime auto subs hit record tights

US subprime auto ABS are pricing at the tightest spreads on record in the face of strong investor demand. The trend is occurring across the capital structure, most recently exemplified by Westlake Automobile Receivables Trust 2017-2, the subordinate tranches of which last week printed at the tightest levels ever for the sector.

August has historically averaged US$11.6bn in consumer ABS issuance since 2012, but this year appears to be reversing that trend, with volumes remaining buoyant. So far, the month has seen US$5bn of consumer ABS price, as the market is stoked by strong investor demand.

Alongside this demand, spreads have continued to grind tighter, even on higher risk subprime auto transactions. According to Wells Fargo structured products analysts, Westlake 2017-2 priced at "some of the tightest spread levels across the capital structure since 2014", with the double-B tranche printing at swaps plus 300bp - the tightest non-benchmark double-B priced on record. This was beaten previously only by UACST 2014-1's double-B notes pricing at plus 315bp (see SCI's primary issuance database).

Rated by S&P and DBRS, Westlake 2017-2 comprises: A-1+/R-1H rated US$214m class A1 notes (which priced at 1.45%), with a 0.22-year WAL; US$249.22 AAA/AAA one-year class A2As (plus 35bp); US$40m AAA/AAA one-year A2Bs (one-month Libor plus 35bp); US$74.84m AA/AA 1.73-year class Bs (70bp); US$98.90m A/A 2.17-year class Cs (100bp); US$81.72 BBB/BBB 2.72-year class Ds (165bp); and US$41.32m BB/BB 2.85-year class Es (300bp).

In terms of the collateral backing the deal, the average borrower FICO score was actually lower than the previous transaction, falling to 596 from 599. Furthermore, the mix of lower-risk gold and platinum receivables has decreased to 38.44% from 41.64%. DBRS notes that given the overall change in collateral mix, it has increased its base-case cumulative net loss to 13.60% for the 2017-2 transaction compared with 13.30% for the 2017-1 transaction.

With investors keen to buy up higher-yielding ABS bonds, this has led not just to tighter spreads, but also narrower tiering across sectors. The Wells Fargo analysts comment that subprime auto ABS new issue double-B notes are now pricing in line with double-B and single-B corporate bonds. However, they suggest that this pattern should be observed carefully as it has been a sign of market resistance in the past.

RB

Structured Finance

Registered, Rule 144A issuance compared

The US SEC's division of economic and risk analysis (DERA) has published a report assessing how trends in primary securities issuance and secondary market liquidity relate to post-crisis regulatory reforms, in line with a Congress request under the 2016 appropriations process. The analysis - which spans 2005-2016 - shows that overall ABS (excluding RMBS) issuance has recovered since the trough of 2010, with the volume of private offerings being slightly larger than the volume of registered ones following the financial crisis, a reversal from the pre-crisis period.

While the dollar volume of both ABS and RMBS has decreased dramatically following the financial crisis, the issuance of registered RMBS stopped after 2008, whereas the issuance of registered ABS continued. For ABS, Rule 144A offerings reached a trough in 2009 (at around US$75bn) and peaked in 2014 (at around US$250bn), while registered ABS reached a trough in 2010 (at around US$50bn) and also peaked in 2014 (at just under US$200bn). Rule 144A RMBS volume peaked in 2010 at around US$75bn and ticked up again to around US$50bn in 2015.

Overall, the number of registered offerings peaked in 2005 at 1,594 (with an average size of US$907m), declined to 65 in 2010 (US$785m) and peaked again at 188 (US$966m) in 2014. The number of 144A deals peaked in 2006 at 1,550 (US$402m), declined to 280 in 2011 (US$491m) and peaked again at 635 in 2015 (US$434m).

The report notes that the market for private-label RMBS is distinct from other ABS markets due to the presence of the GSEs, as its dynamics are more likely linked to the dynamics of the underlying housing market rather than to any effects stemming from changes in the securities market.

Moreover, the report highlights that recent rules specific to the ABS market went into effect after the time period under consideration and some rules - such as credit risk retention - impacted both registered and private markets. Regulation AB2 - which fully applies only to some types of registered ABS offerings - became effective in stages, in November 2015 and November 2016.

"Thus, it is challenging to causally attribute...trends to regulatory impacts," the report states. "Further, while such trends may be generally consistent with regulatory impacts, they are also consistent with other explanations - such as a shift in investor risk tolerance and beliefs about the risks and returns of various ABS offerings, following the financial crisis."

Meanwhile, the report suggests that some measures of CDS market liquidity - including total number of participants transacting in a given reference entity and various trading activity metrics - have remained stable or point to improvements. Other measures show a reduction in activity, however.

Trade sizes have decreased, quoting activity has declined and quoted spreads for the least liquid high yield names have risen. At the same time, interdealer trade activity has declined post-2010, but dealer-customer activity has remained stable.

The DERA report includes a survey of recent academic literature, as well as original analyses drawn from publicly available databases and non-public regulatory filings. The report examines the issuance of debt, equity and ABS, as well as activity and liquidity in US Treasuries, corporate bonds, single-name CDS and bond funds.

CS

Structured Finance

SCI Start the Week - 7 August

A look at the major activity in structured finance over the past seven days.

Pipeline
ABS deals accounted for more than half of last week's pipeline additions. There were seven ABS, three RMBS, two CMBS and a CLO.

The ABS were: US$1.305bn AmeriCredit Automobile Receivables Trust 2017-3; CNY3.67bn Bavarian Sky China 2017-2; A$350m CNH Industrial Capital Australia Receivables Trust Series 2017-1; US$442.78m DT Auto Owner Trust 2017-3; US$979.27m Hyundai Auto Receivables Trust 2017-B; US$350m MVW Owner Trust 2017-1; and US$991.7m S-JETS 2017-1.

Freddie Mac SCRT Series 2017-2, SMHL Securitisation Fund 2017-1 and US$1.296bn Towd Point 2017-4 were the RMBS. The CMBS were US$402m JPMCC 2017-FL10 and US$1.1bn WFCM 2017-C39, while the CLO was A10 TAF 2017-1.

Pricings
A long list of deals priced. There were nine ABS prints, five RMBS, seven CMBS and 11 CLOs.

The ABS were: €330m Aurorus 2017-B; US$1bn Chesapeake Funding II Series 2017-3; US$1.1bn Citibank Credit Card Issuance Trust 2017-A7; US$1.1bn Citibank Credit Card Issuance Trust 2017-A8; US$500.5m ECMC Group Student Loan Trust 2017-2; US$144.16m JG Wentworth XXXIX Series 2017-2; US$350m PFS Financing Corp Series 2017-B; US$501.06m Prosper Marketplace Issuance Trust Series 2017-2; and US$800m Westlake Automobile Receivables Trust 2017-2.

The RMBS were: €400m BPCE Master Home Loans 2017-2; US$443.8m Flagstar Mortgage Trust 2017-1; £400m London Wall Capital Investments 2017-1; US$300m New Residential Mortgage Loan Trust 2017-5; and €747m Popolare Bari RMBS.

The CMBS were: US$760m BX Trust 2017-APPL; US$780m CGDBB 2017-BIOC; US$671m CGMS 2017-MDDR; US$342.2m FREMF 2017-KJ15; US$334m GS 2017-500K; Sfr475m NOE Verwaltungszentrum-Verwertungsgesellschaft; and US$898.7m UBS 2017-2.

The CLOs were: €368.2m Armada Euro CLO I 2017-1; US$1.567bn CBAM CLO Management 2017-2; US$493.2m Dryden Senior Loan Fund 2013-28R; €473.85m Harvest CLO 2014-9R; US$503.4m ICG US CLO 2017-2; €330.5m Orwell Park CLO 2015-1R; €415.25m OZLME 2017-2; US$506.3m Rockford Tower CLO 2017-2; US$350.85m TCP Whitney CLO 2017-1; US$541m Venture CDO 2017-29; and US$509.15m Vibrant CLO 2017-7.

Editor's picks
Peripheral ABS playing catch-up: Structured finance issuance in the European core has held up well over the summer, with spreads continuing to grind tighter. Although peripheral ABS spreads remain wide of the core, the periphery appears to be catching up...
UK ILS hub to drive new issuance, innovation: The proposed ILS regulatory and tax regime due to come into effect on 1 January 2018 aims to put the UK on an even-footing with other jurisdictions and enable it to become a world leader in the catastrophe bond market (SCI 21 July). Notably, the framework is expected to create an accommodating tax environment for ILS vehicles, making it financially viable and efficient to issue in the UK - which could boost issuance and stimulate product innovation...
Regulatory call exercised for Calico: The Co-operative Bank last week announced a regulatory call of its Calico Finance Number One capital relief trade. The call was executed, after UK PRA approval, as part of the bank's plans to improve its capital position...
NPL servicer breaks new ground: Alvarez and Marsal has established the first independent business loan servicing company in Greece. Named Independent Portfolio Management, the fully owned subsidiary has been granted a servicer license by the Bank of Greece for the management of claims from loan and credit facilities in accordance with the local legal and regulatory framework...

Deal news
Sky Aviation Leasing International is in the market with an inaugural securitisation. Dubbed S-JETS 2017-1, the US$780.8m transaction is collateralised by a portfolio of 21 aircraft on lease to 16 lessees located in 13 countries.
Diarough Group - the trading name of Egon Holdings and Emby International - is marketing its first public ABS, having issued a private inventory securitisation in 2007. Dubbed Four Seas 2017-1, the latest US$150m transaction is collateralised by Diarough's rough and polished diamond inventory and outstanding receivables.
Nassau Re has priced an inaugural US$438m CLO. Dubbed Nassau 2017-I, the transaction is a broadly syndicated CLO managed by NCC CLO Manager, a wholly-owned subsidiary of Nassau Re affiliate Nassau Corporate Credit.

CDO

Highly concentrated Trups CDOs see mezz recovery

Trups CDOs remain an attractive source of capital for community bank issuers, but ratings are increasingly reliant on the largest obligors. Trups deals are expected to largely remain outstanding until legal maturity, with redemptions driven by idiosyncratic factors specific to issuers.

Outsized bank issuers have taken on even greater importance for pools, as Fitch notes that 64% of outstanding Trups CDOs contain fewer than 40 performing assets. This makes note ratings particularly sensitive to potential declines in the performance of only a few issuers.

Fitch upgraded 30 Trups CDOs during its 2017 reviews. In 20 of these, redemptions and cures by the widely held bank issuers were the largest contributors to the rating actions.

Prepayments are being driven by issuer-specific factors such as capital planning and acquisitions. Capital planning was cited as a motivation for approximately 38% of the US$482m in redemptions that took place between Fitch's 2016 and 2017 reviews. Merger and acquisition activity preceded another 34% of redemptions in the same period.

In October 2015 there were 128 deferring bank issuers and that figure is down to 58, as of 2Q17. The improvement in deferral resolution has been dictated by cures from Flagstar Bancorp and First BanCorp, notes Fitch. These accounted for 54% of the total US$758.2m cured amount between the 2016 and 2017 reviews.

The rating agency has upgraded 66 notes over the last year. This included 16 senior and 50 mezzanine notes from 30 Trups CDOs. The pace of redemptions, stable credit quality of the collateral, and continued coverage test improvement are the main factors behind the rating actions.

Excess spread is increasingly being diverted from senior classes. "Increasing interest rates help reduce the outsized hedge payments made at the top of the waterfall in the outstanding fixed- payment/floating-receipt interest rate swaps effective in 31 of the remaining 70 Trups CDOs. With additional coverage tests in compliance, it is essential for investors to understand the complex structural features governing the amount and allocation of excess spread," says Fitch.

Average default recovery over the last year was about 8%, although most realised recoveries were below 5%. Just under US$62m of proceeds on total defaulted notional of approximately US$836m were realised.

JL

CLOs

Innovative CRE CLO marketing

Bancorp Bank is marketing a US$314.4m static commercial real estate CLO, backed by 24 floating-rate commercial mortgage loans secured by 31 properties. The transaction, dubbed Bancorp 2017-CRE 2, is structured as a REMIC trust and features several innovations, including not permitting a ramp-up or the acquisition/reinvestment of assets post-closing. The sponsor is also expected to sell the risk retention-compliant first-loss position to a third party.

The US$161.11m class A notes have been provisionally rated Aaa/AAA by Moody's and KBRA. KBRA has also assigned provisional ratings of triple-A to the US$48.72m class AS notes, double-A minus to the US$18.86m class Bs, single-A minus to the US$17.68m class Cs and triple-B minus to the US$23.97m class Ds. The US$12.57m class E and US$11m F notes are unrated. The stated maturity date on notes A to D is August 2032.

The transaction also features a US$20.43m tranche held horizontally for the purposes of risk retention. It is expected to be purchased by VMF Structured Finance, a firm owned by a family of private investment funds and advised by Varde Management.

Moody's comments that among the strongest features of the transaction are that three of the loans - which make up 14.8% of the structure - are assigned an investment grade. The loans are for Princeton Park Homes, a 908-unit apartment block in Chicago; 10870 West Katella Avenue, a retail centre in Garden Grove, California; and Monmouth Executive Centre, four cross-collateralised buildings in Freehold, New Jersey.

Furthermore, the rating agency says that the deal benefits from property and loan level diversification, with 24 loans secured by properties in 14 different states. The asset class composition is a further strength, with 72.5% of the pool balance collateralised by historically less volatile asset types, including 11 multifamily properties and nine anchored retail venues.

Exposure to more volatile asset classes, such as hotel, office and unanchored properties, is limited. In terms of geography, three state exposures exceed 10% of the trust balance, with Texas making up 25.9%, Illinois 16.4% and New Jersey 11.7%.

KBRA notes that a potential risk of the transaction is that the pool generally contains transitional and non-stabilised properties, although the agency adds that the assets generally have business plans that include upgrading elements of the properties to attract tenants. Typically, however, cashflow from transitional and non-stabilised properties is more volatile than the cashflow from stabilised assets, as their performance depends largely on the success of the implemented business plan.

The transaction is secured by the fee interests in the 31 properties and the collateral comprises whole loans or participations in whole loans, with eight of these having associated unfunded future advance amounts represented by companion pari passu participations (with an aggregate unfunded amount of US$14.3m) that are held outside the trust by the seller. One asset is a pari passu participation interest in a whole loan where the companion participation was securitised in the sponsor's previous securitisation (BANC 2016-CRE1).

The majority of the loans were originated this year, although three were originated in 2016, and all have extension options exercisable on satisfaction of certain conditions set forth in the related loan documents. Of the loans, 22 have an initial three-year term with initial maturity dates that range from November 2019 to August 2020, while the remaining two have an initial two-year term with initial maturity dates in August and October 2018.

All loans are indexed to one-month Libor and have third-party Libor cap agreements in place that extend through each loan's initial maturity date, apart from one loan - Corporate Centre at Moorestown (the third largest) - for which the rate cap agreement expires one year prior to the loan's initial maturity date. As a condition to the exercise of any extension option, each loan also requires that the related borrower obtain a replacement Libor cap agreement for the duration of any extension term.

RB

CMBS

Green agency CMBS 'first' prices

Fannie Mae has priced its first GeMS REMIC backed exclusively by green MBS collateral. The issuance is the first of its kind in the market and builds on the GSE's previous US$1bn FNA 2017-M2 transaction, which was backed by 30 loans originated under the Fannie Mae green financing business and securitised as green DUS MBS (SCI 16 February).

FNA 2017-M10 is Fannie Mae's most recent transaction and its eighth multifamily DUS REMIC in 2017 under its GeMS programme. The transaction has an AV1 and AV2 tranche each backed by 20 seven-year loans originated under the Fannie Mae green financing business and securitised as green DUS MBS. The loans are secured by multifamily properties that have either achieved a green building certification or were targeting a 20% reduction in energy or water consumption.

"The Fannie Mae multifamily platform continues to chart new territory with the market's first REMIC deal backed entirely by multifamily green MBS," says Lisa Bozzelli, director, Fannie Mae multifamily capital markets and pricing. "As the book of tradable green DUS MBS surpasses the US$14bn mark, we are excited to be able to provide an investment opportunity for those GeMS investors who value both a socially responsible investment opportunity and appreciate the high credit quality of DUS collateral."

Full and timely payment of interest and principal is fully guaranteed by Fannie Mae on both classes of FNA 2017-M10. The US$36m AV1 tranche has a weighted average life of 4.29 years, a coupon of 2.646%, a spread of 27bp over swaps and an offered price of 101.8. The US$837m AV2 tranche has a weighted average life of 6.66 years, a coupon of 2.646%, a spread of 45bp over swaps and an offered price of 100.5.

The collateral is primarily located in Connecticut and California, which account for 29.4% and 29.8%, respectively. Massachusetts accounts for 15.5%. Weighted average DSCR is 1.79x and average LTV of the collateral is 60.8%.

The transaction's settlement date is 30 August. Citigroup is lead manager, with Amherst Pierpont Securities, Credit Suisse and The Williams Capital Group serving as co-managers.

JL

Structured Finance

Job swaps round-up - 11 August

North America

John DiRocco has joined CIFC as coo, overseeing non-investment functions, as well as the expansion of the firm's investment product offerings in the US and internationally. DiRocco previously served as coo and a founding member of Reef Road Capital, and before that was at Citadel Investment Group and Paloma Partners. He will be based in New York and report to CIFC co-ceos Oliver Wriedt and Steve Vaccaro.

Michael Tamasco has been named president of Steadfast Alcentra Global Credit Fund, an unlisted closed-end fund advised by Steadfast Investment Adviser and sub-advised by Alcentra NY that provides customised financing solutions to middle-market companies. Tamasco will also serve as president of Steadfast Investment Adviser and seek to further the firm's efforts to expand in the direct equity and debt markets. He previously served as md of Optima Fund Management and before that was co-head of Rothschild Asset Management US.

Willis Towers Watson has appointed Susan Lane as director, consulting and development for North America and senior captive consultant, part of the company's global captive practice. She joins Willis Towers Watson from Tokio Solution Management, where she was co-ceo.

Daniel Nolan has joined BTIG in New York as a director, leading its distressed debt trading desk. Nolan was previously an svp within distressed debt trading at Jefferies. He began his career as an analyst on Citi's structured credit desk.

EMEA

Rhodri Lane has been hired by Aon Securities as md, capital markets, heading up the ILS business for the EMEA region. He will start on 14 August and replaces  Darren Bailey, based in the London office. Lane was previously vp, ILS origination at Guy Carpenter.

Acquisition

Pepper Group has entered into a scheme implementation deed with KKR Credit Advisors affiliate Red Hot Australia Bidco, under which it is proposed that Bidco will acquire all Pepper shares via a scheme of arrangement. If the scheme is implemented, Pepper shareholders will receive a cash payment of A$3.60 per share - which values Pepper's fully diluted equity at approximately A$675.9m - or an equity alternative of one share in Red Hot Australia Holdco (the owner of Bidco). Shareholders will be able to vote on the scheme in early November.

Mergers

Invitation Homes and Starwood Waypoint Homes are merging to create a combined company with 82,000 properties across 17 markets, creating the largest owner of single-family rental (SFR) homes in the US. The new entity - called Invitation Homes - is expected to realise US$45m-US$50m in operating savings in common regional markets, especially in western states and Florida, where the two firms have a large concentration of homes. Moody's suggests that the merger will be credit positive for both their SFR securitisations, as the combined company is likely to benefit from economies of scale and better access to financing, improving its ability to pay down the loans backing the securitisations.

Request for comment

The OCC last week requested public comment on whether certain aspects of the implementation of the Volcker Rule should be revised. This is because of an acknowledgement that the rule may not be achieving what it intends to, with CLOs an unintended casualty of the ban on banks owning private equity. The LSTA has welcomed the OCC's fresh look at Volcker, saying regulators have arguably been "overreaching" in their interpretation of 'ownership interests' of 'covered funds', with all the fallout that has had for CLOs (SCI passim). The LSTA says: "The OCC's notice, which specifically identifies these two definitions, could potentially open a path toward revising those interpretations, once again allowing CLO managers to include some bonds in their portfolios."

CLO name-change

Apex Credit Partners has renamed a trio of CLOs that it manages. The JFIN CLO 2015-II, JFIN CLO 2016 and JFIN CLO 2017 transactions will now be known as Apex Credit CLO 2015-II, Apex Credit CLO 2016 and Apex Credit CLO 2017 respectively.

NPL sale

Blackstone Real Estate Partners Europe V has acquired a majority 51% stake in a new company to which Banco Popular will transfer non-performing loan assets with an aggregate gross book value of approximately €30bn, as well as 100% of the share capital of its real estate management company Aliseda, following a competitive process where three firms with track records in managing real estate assets presented offers. Blackstone will also assume management responsibilities for the portfolio, while Banco Popular will own the remaining 49% stake. The valuation attributed to the Spanish assets of the business is approximately €10bn.