Contents

CLOs

New investment era embedded

It has been a banner year for US CLOs, with new issue volumes already topping US$100bn, plus resets and refinancings accounting for a further US$140bn. Not only have risk retention requirements embedded successfully, despite initial concerns regarding their implementation, they have also created new investment opportunities.

Neil Weidner, partner at Cadwalader, notes that 2017 marks the first year post-crisis in which there has been robust US CLO issuance in every quarter. He points to particularly strong demand from investors in Japan, the US and Canada, and the fact that many deals are oversubscribed. He suggests that such volumes indicate risk retention requirements are now part of the fabric of the market, with CLO managers having spent time and resources complying with the rules and financing being provided in turn.

Stephen Vaccaro, co-ceo and cio at CIFC Asset Management, says that risk retention requirements have benefitted the market by creating new investment opportunities and therefore attracting new investors. "The creation of risk retention funds allows equity investors to invest across multiple deals with more certainty and creates more favourable economics than investing on a deal-by-deal basis," he explains. "However, the rules have also created more concentration in issuance across larger managers that have better capacity to raise capital. Large managers can typically also afford larger teams."

Risk retention solutions have typically taken three main forms: large-scale capital raising efforts by large platform institutional issuers; new managers (often insurer affiliates) retaining all or most of the equity; and smaller managers using a combination of creative solutions and risk retention financing (SCI passim). In particular, structured products analysts at Wells Fargo note the entrance of larger alternative investors that traditionally invest in private equity, but who had not previously bought CLO equity due to the relatively small tranche size and the amount of time required per transaction.

"These investors have found risk retention vehicles from large platform CLO managers to be an efficient way to invest in CLO equity and have increasingly allocated capital to CLO equity," they observe.

They count around 20 managers that have raised almost US$8bn in risk retention, not counting insurance-affiliated managers that retain their own equity. "We believe managers with large risk retention funds will continue to utilise these funds, as the funds have allowed a new class of investors to gain exposure to CLO equity. We think these funds are positive for issuance and that these managers' issuance patterns may be less susceptible to changes in the new issue equity environment."

Weidner believes that a major theme in 2018 will be identifying further strategies for risk retention financing. "Many managers are trying to optimise their powder by taking down vertical strips and agreeing bilateral contracts with financing providers, typically insurance companies," he says. "However, this process takes a while and there is limited capacity. The desire by managers to source alternative funding providers remains, so arrangers may begin financing deals, for example."

Away from risk retention, 2017 was also characterised by unprecedented tightening in mezzanine CLO tranches. Triple-B spreads generically moved from 415bp to 250bp, while single-A spreads moved from 260bp to 170bp, for instance.

The Wells Fargo analysts suggest that overseas investors and domestic corporate buyers increasing allocations to CLO tranches drove much of the new demand for single-A and triple-B tranches. "Even as spreads tightened, these buyers continued to buy CLO single-A and triple-B tranches, attracted by current yields near 3% or 4% respectively, with floating rate upside," they observe.

They add: "Should the rate outlook continue to drive floating rate demand, we expect these crossover investors to continue to find compelling relative value in CLO tranches. However, we are not convinced all the new demand represents a permanent increase in the CLO buyer base."

Indeed, the analysts believe that these investors could gravitate away from CLOs, should the rate outlook shift or if yields increase on competing assets. They also suggest that these investors may be more likely to sell in a downturn, due to relatively less experience in CLOs and fears of headline risk.

Nevertheless, investors are increasingly seeking a global footprint, according to Vaccaro. "Over time, the European loan market will evolve to one approaching the US model. We're consequently expanding into Europe and broadening our US product set to offer a variety of risk profiles - whether in the form of separately managed accounts or via a global opportunities fund. Our European license will provide us with more freedom to attract capital to our US funds."

At the same time, as capital becomes more constrained across the banking industry, the banking model is expected to migrate towards distribution. With greater distribution of loans, larger loan fund businesses should emerge.

"There is always room for more managers to enter the market. We're also likely to see experienced people setting up new shops inside larger businesses," Vaccaro observes.

Continued large-scale risk retention capital raising, the increased volume of funds targeting CLO investments and large numbers of new CLO managers are expected to result in even higher US CLO issuance next year. Indeed, the analysts predict that new issue volumes will reach US$125bn in 2018.

A couple of potential regulatory challenges to the status quo are looming on the horizon, however. The first is the US Treasury report, which recommended repealing elements of the Dodd-Frank Act (SCI 9 October).

The analysts expect any repeal or reduction in risk retention requirements to mainly affect smaller managers that have not been as successful in raising large amounts of risk retention capital and result in more issuance by these smaller managers. They also suggest that reset/refi activity in 2015-2016 vintage CLOs could dramatically increase if risk retention requirements are repealed or reduced.

"As US money managers have demonstrated a large appetite for triple-A refis, we think an active refi market would continue, benefiting CLO equity investors. We also think increased refi activity will help boost CLO issuance at the margins, as equity investors may be marginally less concerned with debt costs at issuance, given the ability to refinance CLO liability coupons," the analysts explain.

Resets are likely to remain a popular option, in any case, as CLO equity investors and managers seek to extend existing obligations under favourable market conditions. In addition, resets allow equity investors to gain optionality and managers to increase assets under management.

Vaccaro notes that while the Treasury proposals may ultimately result in the risk retention piece being modified for CLOs, it is difficult to front-run them until the outcome is seen. "Many deals are dual-compliant, so they would remain in place for efficiency reasons, even if there is a repeal. Nevertheless, the proposals would bring smaller managers back to the market, driving an increase in issuance - which could cause a further tightening of loan spreads and a widening of CLO liability levels."

The second potential regulatory challenge is the LSTA's ongoing lawsuit against the SEC and the Fed regarding the definition of 'securitiser' in relation to 'open-market' CLO managers under the risk retention rules (SCI 25 February 2016). The designation of asset managers as securitisers is widely held to be a flawed concept, as CLO managers of broadly syndicated loans don't originate assets. Yet the case did poorly in the lower court and is now going through the appellate court.

The LSTA is pushing for 'qualified CLOs' as a compromise. But Vaccaro questions what 'qualified' actually means.

"Will the definition be based on leverage or rating?" he asks. "Perhaps a more logical interpretation is that it dovetails into the OCC, Fed and FDIC leveraged lending guidance. However, the imposition of leverage limits on loans eligible to be held by CLOs could constrain CLO new issuance, as the vehicles would be harder pressed to buy collateral."

Vaccaro continues: "In a functional market, it is easier for certain managers to participate. I'm not certain that the solution is to both broaden the market and shrink the eligible asset pool."

A third possible headwind for the CLO market is the Senate's passage of the 'Tax Cuts and Jobs Act', whose limit on corporate interest rate deductions of 30% of EBIT is expected to affect the leveraged loan market. New loan supply could shrink, due to the deductions, putting tightening pressure on loan and CLO spreads. The bill could also help relatively profitable firms while exacerbating potential credit problems of highly leveraged firms.

Regarding concerns of increased volatility next year, Vaccaro points to the fact that historical performance data for CLO bonds across the capital structure is strong. "It's important to separate the price of a bond from the performance of a fund," he suggests. "The key is to analyse not only the high-level metrics, but also the individual names, and gain a good view of the collectability of a portfolio."

He concludes: "History has proven that well-structured, diversified pools can weather cycles, as long as they're managed properly. Lower growth, coupled with lower interest rates have produced less volatility and more free cashflow. So while it is possible to argue that leverage is increasing and loan agreements are more flexible, the underlying borrower performance remains sound."

CS

NPLs

Confidence boost for synthetic NPL deals

A recent Ashurst survey notes that securitisation may prove to be the most prevalent method of non-performing loan resolution in Greece in the early years of the market, given the established infrastructure for this type of transaction. Indeed, NPL investors rank Greece in their top-two southern European target investment countries for the next 12 months.

According to the survey results, nearly a third of investors and issuers allude to synthetic securitisations of non-performing portfolios as one strategy for risk transfer. "Securitisation is a tried and tested route in Greece and offers a proven structure under which transactions can be implemented with certainty - this is not the case for outright loan sales under the newly implemented laws," says Mark Edwards, partner at Ashurst. "For some securitisation structures, sellers can retain the lender of record role and can maintain their client relations going forward."

However, the majority of sellers and investors that responded to the survey display a preference for loan sales over synthetic securitisations - a pattern that is also witnessed in the more mature markets. The preference for loan sales among sellers may in part reflect an appetite to implement a clean break from a proportion of credits, and divest the burden of holding and servicing a proportion of NPLs. For the buy-side, it may reflect the views of those investors that have access to licensed servicing arrangements, wishing to roll over their acquisition strategy from other markets to Greece and realise value for themselves without the continuing involvement of the seller.

The results reveal that 84% of investors rank Greece in their top-two target southern European countries, followed by Italy, with Cyprus, Spain and Portugal coming some way behind. The research sample includes all major Greek financial institutions, Greek NPL servicers, buy-side investors and financial and legal advisers.

Furthermore, investors reported that they were very (55%) or moderately (35%) likely to consider Greek NPL transaction opportunities coming to the market in the next 12 months. The view that the country's macroeconomic situation will show marked improvements, mainly in the hospitality sector, is one factor driving increased interest.

Investors also welcome the suite of recent reforms, believing that they will be conducive to creating an effective secondary market. "In this respect, one major reform is the amendment to laws imposing potential criminal liability for bank officers approving consensual restructurings," observes Edwards.

The law has now been amended to provide greater clarity on the parameters in which bank officers must operate in order to avoid the risk of prosecution, and provide a defence against it where officers have acted in good faith. Olga Galazoula, partner at Ashurst, notes: "Bank officers may be subject to that liability, following the approval of a write-off. The reform is indeed welcome for a country with a lot of relationship banking, such as Greece. Similarly, the enforcement regime has been rendered less susceptible to challenge by obstructive borrowers."

However, while the recent legislative changes have on balance been welcomed, the legislation remains untested in practice. Edwards observes: "The Greek court process tends to be slower; the new reforms don't deal with the backlog of cases and the judiciary may lack training in these matters."

Hence, the next 12 to 18 months will be critical in terms of establishing whether the new legislation has been a success, on the basis of transactions that have actually been implemented.

Investors though seem to be realistic about the challenges. Specifically, 95% of investors view a realistic investment exit timeframe as between seven and 10 years.

Similarly, the prevailing IRR ranges are seen as between 10% and 15%. Respondents appear to be generally aware that in order to maximise the likelihood of financial success in Greece, they will need to play a longer-term game, compared to other European NPL jurisdictions.

Overall, the outlook for the market seems fairly positive. For securitisation transaction flow in particular, both Ashurst partners expect Greece to follow a route similar to Italy's. Galazoula concludes: "Granular and unsecured books that are really well provisioned are likely to come first. Secured deals will eventually follow unsecured ones. It is already being considered."

SP

Structured Finance

SCI Start the Week - 4 December

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

Pipeline
The pipeline burst back into life last week as 10 ABS deals were added. There were also three RMBS, six CMBS and two CLOs announced.

The ABS were: US$200m American Credit Acceptance Receivables Trust 2017-4; US$400m Avis Budget Rental Car Funding Series 2017-2; CNY4bn Bavarian Sky China 2017-3; US$126.32m CarNow Auto Finance Trust 2017-1; US$270m Foundation Finance Trust 2017-1; US$722.5m KDAC Aviation Finance; US$298.33m HERO Funding 2017-3; US$515m OneMain Direct Auto Receivables Trust 2017-2; US$425m SoFi Professional Loan Program 2017-F; and US$1.025bn Wendy's Funding Series 2018-1.

US$1.852bn Freddie Mac SCRT Series 2017-4, US$300m LoanDepot Station Place Agency Securitization Trust 2017-1 and US$200m STACR 2017-HRP1 were the RMBS. The CMBS were: US$140m BAMLL 2017-SCH; US$1.05bn BANK 2017-BNK9; US$1.311bn CHT 2017-CSMO; US$1.322bn FREMF 2017-K70; US$365m MSC 2017-JWDR; and US$684m UBS 2017-C6.

The CLOs were €420m ALME Loan Funding IV and €370m Carlyle Euro CLO 2017-3.

Pricings
In a busy week, there were also six ABS prints, five RMBS, five CMBS and eight CLOs.

The ABS were: €4.22bn Adriano Lease Sec; US$239.4m Consumer Loan Underlying Bond Credit Trust 2017-P2; US$253.96m HERO Funding 2017-3; US$530m Juniper Receivables; A$542.5m Latitude Australia Personal Loans Series 2017-1; and A$300m Liberty Series 2017-1 Auto.

The RMBS were: US$210.16m Angel Oak Mortgage Trust I 2017-3; US$671.69m JPMMT 2017-5; €600m Pontormo RMBS 2017; A$250m RedZed Trust 2017-2; and €6bn TDA Sabadell RMBS 4.

The CMBS were: US$540m BBCMS 2017-GLKS; US$273.7m BX Trust 2017-CQHP; US$696.7m CCUBS 2017-C1; US$1bn GSMS 2017-GS8; and US$785.9m WFCM 2017-C41.

The CLOs were: US$505.45m CIFC Funding 2012-2R; US$611.6m Dryden 53 Senior Loan Fund; US$586m FDF 2017-3; US$492m Harvest CLO XIIX; US$610.8m Long Point Park CLO; US$460m Oaktree CLO 2015-1R; USS$460m OCP CLO 2015-10R; and US$259.8m RAIT 2017-FL8.

Editor's picks
Fresh blow adds to CMBS retail woes: The retail sector's well-publicised woes are affecting both primary and secondary CMBS. While the high retail concentration in outstanding US CMBS continues to concern the market, the retreat of lenders from the retail space means that now even healthy malls are struggling to attract financing...
Hurdles remain for Chinese ABS: Chinese securitisation issuance reached RMB808bn in aggregate from 425 transactions last quarter, up from RMB498bn from 318 deals as of 3Q16, according to Fitch. However, while the domestic ABS sector may be growing, the market is unlikely to reach full maturity until it becomes truly cross-border...
Provisioning differences highlighted: UniCredit and Intesa Sanpaolo recently revealed differences over the ECB's provisioning guidelines, with the spotlight falling on non-performing loan recovery mechanisms. Speaking at IMN's Investors' Conference On Italian & European NPLs, representatives from the lenders also discussed their NPL strategies going forward...
Fino phase two initiated: UniCredit has closed Fino 1 Securitisation, marking the beginning of phase two of Project FINO, its plan to sell down a portion of the retained exposure relating to a €17.7bn portfolio of non-performing loans (SCI passim). The lender can now apply for the Italian GACS guarantee and sell the senior notes to investors, a first for GACS senior notes...
Risk transfer come-back: Bank of Ireland has returned to the risk transfer market with Mespil Securities 2017-1. The lender's latest capital relief trade will increase its common equity Tier 1 capital ratio by 0.45% and comes a year after it carried out a similar transaction on around €3bn of loans from its business banking and corporate banking divisions in Ireland (see SCI's capital relief trades database)...
US CLOs rising: US CLO secondary market volumes and pricing levels are once again rising. "Overall November has been an up month for CLOs across the board," says one trader. "Secondary spreads remain firm to slightly tighter despite high BWIC volumes..."

Deal news
• LoanDepot is in the market with a US$300m repo RMBS transaction, marking the first issuance under the Station Place programme (SCI 5 February 2016) in which the non-bank lender is acting as repo seller, as well as sponsor and servicer. Dubbed LoanDepot Station Place Agency Securitization Trust 2017-1, the deal comprises a revolving warehouse facility collateralised by newly originated first-lien, fixed-rate residential mortgage loans eligible for purchase by Fannie Mae and Freddie Mac or for guarantee by Ginnie Mae.

Regulatory update
• The UK buy-to-let (BTL) market could see a drop in lending volumes and RMBS issuance, following the introduction of new regulations by the PRA. New energy requirements coming into force in April may also strain the sector, although they could lead to the emergence of a green UK RMBS asset class.

Capital Relief Trades

Innovative financial guarantee printed

Raiffeisen's €1.2bn ROOF Slovakia 2017, which is believed to be the first synthetic securitisation of Slovak assets (SCI 1 December), strengthens the bank's common equity tier 1 ratio (fully loaded) by around 12bp at the group level. The bank plans to be a programmatic issuer of risk transfer trades via its 'ROOF' securitisation platform.

ROOF Slovakia 2017 represents a financial guarantee from its Slovak subsidiary Tatra banka and references a portfolio of corporate loans and project financings. "Securitisations are an important instrument for strengthening our capital ratio. We chose an innovative structure, which doesn't affect our client relations and supports our growth on group level, due to the risk transfer," says Martin Grüll, cfo of RBI.

Similarly, Oliver Furst, head of active credit management at Raiffeisen, observes: "We have been using synthetic securitisations regularly as a balance sheet optimisation tool. This transaction now provides additional flexibility in portfolio composition and hence it very much supports growth at group level."

The SPV is a Luxembourg registered vehicle that issued a CLN subscribed by investors. The structure comprises senior, mezzanine and junior risk positions. The credit risk of the mezzanine tranche was sold to a European institutional investor, while RBI retained the credit risk of the junior and senior tranche.

Investor demand for the transaction was driven by several factors. Furst notes: "In general, there is a demand for these assets at the moment. Moreover, we have a proven track record in securitisation of loan portfolios in the CEE region. Tatra banka is also a leading corporate bank in Slovakia, so the buyer invests in a sample of a loan portfolio from a leading Slovakian corporate bank."

According to Q3 results, Raiffeisen's total capital amounted to €12.5bn, as at 30 September 2017. This corresponds to an increase of €728m, compared to the 2016 year-end figure. Common equity tier 1 (after deductions) was up by €235m over the same period.

According to SCI's capital relief trades database, Raiffeisen's last risk transfer transaction with Tatra bank was EIF JEREMIE Slovakia, which referenced a €60m portfolio of Slovakian SME loans maturing in June 2025. The database also reveals four ROOF transactions referencing corporate and other assets over the last seven years.

Developed by the European Commission and the EIF, the JEREMIE (Joint European Resources for Micro to Medium Enterprises) initiative offers EU member states - through their national or regional managing authorities - the opportunity to use part of their EU structural funds to finance SMEs by means of equity, loans or guarantees through a revolving holding fund acting as an umbrella fund.

SP

Capital Relief Trades

Risk transfer round-up - 8 December

Nord LB has this week closed a shipping significant risk transfer transaction dubbed Northvest 2. The €1bn shipping credits form part of a €10.1bn multi-asset portfolio.

The transaction coincides with the finalisation of the outstanding Basel 3 reforms. The RWA output floor has been agreed at 72.5%, as expected.

More importantly though, banks will have until 2027 to adhere to the rules, which take effect from 1 January 2022.

CLOs

MMCF CLO debuts

TCG BDC, formerly Carlyle GMS Finance, has teamed up with Credit Partners USA, a subsidiary of Canadian pension firm PSP, in a US$400m CLO. MMCF CLO 2017-1 is a static middle-market CLO and the first to be serviced by Middle Market Credit Fund (MMCF).

Fitch and S&P have assigned ratings of triple-A on the US$231.70m class A1 notes, which have a modelled interest rate of three-month Libor plus 117bp. S&P has rated the US$48.3m A2s double-A (three-month Libor plus 150bp), US$15m B1s single-A (three-month Libor plus 225bp), US$9m B2s single-A (430bp), US$22.9m class Cs triple-B (three-month Libor plus 320bp) and the US$113.64m class D notes double-B (three-month Libor plus 638bp). The B1, B2, C and D notes are all deferrable and there is also US$47.90m in preferred interest securities.

This is the first CLO to be serviced by Middle Market Credit Fund (MMCF), which is a joint venture between TCG BDC and Credit Partners USA. Both members will serve on the investment committee tasked with selecting initial assets that will comprise the transaction's portfolio at closing.

After the transaction has closed, MMCF will have no investment discretion over the static pool and no voting discretion with regard to the assets. MMCF will act solely in an administrative capacity with respect to the portfolio.

Healthcare and software firms are joint top obligors with 4% each of the overall portfolio, with professional services firms the next largest obligor with 3.5% of the portfolio. This is followed by food product firms, construction and engineering and telecoms firms all making up 3% of the portfolio.

The transaction has a static portfolio with no reinvestment period and so will be fully ramped at closing with no additional loans to be acquired by the CLO after the closing date. The portfolio of loans identified for purchase on the closing date will initially be transferred to the issuer in the form of participations and the majority of the underlying collateral obligations have credit estimates assigned by S&P.

Furthermore, 98.75% of the par balance of the closing date portfolio will initially be transferred to the issuer by participation and assignment from Middle Market Credit Fund SPV, a financing subsidiary of the originator. The additional 1.25% of the par balance of the closing date portfolio will initially be transferred to the issuer by participation and assignment from the originator.

The initial purchaser in the transaction is Citigroup. It is expected to close on 19 December.

RB

CMBS

Record post-crisis CRE CLO prepped

Blackstone Mortgage Trust (BXMT), a Blackstone-owned REIT, is marketing an inaugural US$1bn CRE CLO. Dubbed BXMT 2017-FL1, the transaction is the largest CRE CLO since the crisis and will initially be backed by 31 equally-sized non-controlling interests that are collateralised by 71 properties.

Moody's and KBRA have assigned provisional ratings of Aaa/AAA to the US$530m class A notes. Only KBRA has provisionally rated the rest of the notes, assigning a triple-A rating to the US$85 class AS notes, double-A minus to the US$61.25m class Bs, single-A minus to the US$58.75m class Cs, triple-B minus to the US$82.5m class Ds, double-B minus to the US$45m class Es and single-B minus to the US$37.5m class Fs. There is also US$100m of preferred shares, which are unrated, and the stated maturity date on all of the notes is June 2035.

The initial collateral is comprised entirely of participations in 31 related whole loans, which have a total committed balance of US$3.8bn. Two of the collateral interests are each structured as a combination of a mortgage loan and mezzanine loan, both of which have pari-passu interests within the transaction structure.

The properties are located in 12 states, with the top three exposures in California (35.5%), New York (16.1%) and Illinois (9.7%). The pool has exposure to three property types: office (61.3%), multifamily (22.6%) and lodging (16.1%).

All but two of the loans were originated by BXMT. The proceeds of 18 loans were used for property acquisitions and 13 loans were used to refinance existing debt.

Moody's comments that the transaction is subject to replenishment under certain eligibility criteria and provides for companion loan acquisitions during its life, where principal proceeds from the first 10 repayments may be used to purchase additional non-controlling pari-passu participations from the remaining portfolio of existing assets. The companion loans comprise US$2.4bn funded participations and US$400m unfunded future funding commitments that relate to 28 loans. All of the companion participations are currently owned by a subsidiary of the seller, 42-16 Holdco.

Additionally, up to 10 assets may have modifications to both the WAL and WAS, subject to certain asset level performance metrics.

The transaction is expected to close by 21 December.

RB

Structured Finance

Job swaps round-up - 8 December

EMEA

Clayton Euro Risk has announced that Tony Ward, ceo and president, and Simon Collingridge, client solutions and strategic delivery director, are leaving the company to pursue other business opportunities.

CMS has hired Neil Hamilton as partner to its capital markets and derivatives team in London. He joins from Jones Day where he was also partner and boosts the team to five, with a range of experience across derivatives, structured finance and capital markets expertise.

Gii Finance Network has appointed Clint Eastwood as its new chief distribution officer. Eastwood joins the UK-based specialist provider of structured finance programmes to mid-sized and large corporates having previously worked at Standard Chartered for 22 years, most recently as director of transaction banking, trade asset sales and syndications for Europe and sub-Saharan Africa. He will be based in London.

North America

Walker and Dunlop has hired Gregory Krafcik as md on its capital markets team, which brokers commercial real estate loans to life insurance companies and CMBS lenders and sources Fannie Mae, Freddie Mac, and United States Department for Housing and Urban Development loans. He will be based out of the firm's Atlanta, Georgia office and was previously md at Greystone & Co where headed up CMBS originations for the southeast of the US.

Sun Life Investment Management has hired Sam Tillinghast as president, US private credit. Tillinghast will be responsible for leading the company's existing US private fixed income group and its growing third-party institutional business and joins on 2 January, 2018 reporting to Candace Shaw, senior md and portfolio manager, private fixed income. Prior to joining Sun Life, Tillinghast was md and head of the private placement group at AIG.

Bank expansion

Macquarie Principle Finance is expanding, opening a new office in San Francisco which will be a staffed by a team of financing and investing professionals. The team will focus specifically on opportunities to provide customized financing and investing commitments to corporate and commercial real estate clients, ranging from US$25m to US$250m, located in the western regions of the US and Canada. It will be led by Andrew Honan, a senior md at Macquarie Principal Finance, will lead the San Francisco team, relocating from London.

Blockchain trade

Solidum Partners has executed the first secondary market trade of an ILS bond on a blockchain, without using a bank or broker-dealer and without any fees being charged. The trade was performed anonymously without direct contact between the buyer and seller, albeit both participants had undergone the required KYC/AML performed by a regulated entity. The transaction involved Solidum Partners, on behalf of one of its funds, entering an offer of Dom Re IC securities held by the fund on the private ILSBlockchain that were purchased by a new participant in the blockchain.

Fund launch

Silverpeak Credit Partners has launched its flagship fund, Silverpeak Credit Opportunities, with a target raise of US$250m for a drawdown fund. Led by Adam Hagfors, the former global head of the legacy bank at UBS, the fund seeks to identify overlooked fundamental value in primarily illiquid and less liquid special private situations, corporate credit and securitised products. Silverpeak Credit Opportunities is the first in a series of funds that will seek to capitalise on the full capabilities of Hagfors' team and its bad bank network.

Indian investment

A wholly-owned entity of Abu Dhabi investment Authority (ADIA) has become a significant minority shareholder in KKR India Financial Services (KIFS). KIFS says the investment provides a "high-caliber partner" to work alongside as it further scales its platform and leverages its balance sheet to extend bespoke financing solutions to corporations and mid-sized enterprises with long-term capital needs. The firm has extended approximately US$4bn of financing to companies over the past eight years.

Non-core disposals

Banca Carige has entered into exclusive negotiations with Chenavari Investment Managers for the disposal of its consumer credit company Creditis Servizi Finanziari. As part of the bidding process, Chenavari has underwritten a first loss commitment with Equita SIM for an amount of up to €40m in relation to Banca Carige's rights issue. Additionally, Banca Carige has entered into a binding agreement with Credito Fondiario for the non-recourse disposal of a portfolio of mortgage and signature non-performing loans for a gross nominal value of approximately €1.2bn, as at 30 March 2017. The consideration for the transaction is €265.7m, corresponding to a sale price equal to approximately 22.1% of the portfolio gross book value. Credito Fondiario will also acquire the bank's NPL management platform, plus a multi-year servicing agreement, for €31m.

PACE assessment

The US FHA has stopped insuring new mortgages on properties that include PACE assessments, citing the fact that it can no longer tolerate putting taxpayers at risk by allowing such obligations to be placed ahead of the mortgage itself in the event of a default. The agency says its decision is part of a larger effort to protect the health of its single-family mutual mortgage insurance fund (MMIF) and the borrowers who rely upon it. The FHA's latest annual report shows that the fund had a total economic net worth of US$25.6bn, while the capital ratio remains above the statutory minimum for a third straight year. The agency also expressed its concern about PACE obligations being placed on FHA-insured mortgages that are already outstanding, suggesting that the post-endorsement placement of these assessments on a mortgage creates a lack of transparency, "making it difficult for the agency to understand the true nature of the risks involved".