Contents

Structured Finance

French ABS to benefit from new regime

The creation of a new SPV regime in France (SCI 11 October 2017) will boost the country's ABS sector by simplifying the existing investment framework and streamlining the origination of loans and structuring of transactions. It is also hoped that the new vehicle will enable France to compete with other jurisdictions in attracting foreign capital for a range of credit initiatives.

Clement Vandevooghel, counsel at Gide Loyrette Nouel, comments that the reform is awaiting finalisation but is otherwise optimistic for the structured finance landscape in France. "In general, it is good news for the market and should help the ongoing recovery of the French securitisation sector, which still isn't at pre-crisis levels. The legal framework should now stabilise, which is always positive for investors. Overall, the market is still active, however, and there are new players getting involved - including non-banks and asset managers," he says.

The rationale of the reform was to create a new vehicle that would fall under the scope of the AIFMD and which would therefore be compliant with AIFM regulations. He continues: "This should be of benefit to investors who find the existing framework very complex, as the current securitisation vehicles aren't fully compliant with AIFMD. However, the new vehicle will not have the possibility to tranche its notes, hence will not be able to qualify as a securitisation vehicle under CRR."

Vandevooghel adds that these legal changes should overall be positive for the origination of loans and structuring of transactions and he believes that most asset classes should be positively impacted. In particular, he suggests that infrastructure, corporate and real estate financing could benefit and, in in line with this, he indicates that the outlook for CMBS in France - and Europe in general - is better for 2018.

He also suggests that synthetic securitisation activity could see a boost this year, although the finalisation of STS is likely to have a greater impact. He believes this year could be more of a transitional period, but says that STS has "opened up greater possibilities for the issuance of structured finance vehicles."

Vandevooghel is particularly optimistic about the new vehicles being used as a template for similar vehicles throughout Europe. He says: "We hope that these reforms will close the gap between France and Luxembourg; they certainly help to make France a more credit-friendly jurisdiction and we hope it will be the starting point for firms from other jurisdictions. So, while we expect it to benefit France, we don't think it will be the only market that benefits."

From the investor point of view, Michel Fryszman, head of structured finance at BNP Paribas Asset Management, is also hopeful for the benefits the new financing vehicle will bring. He concurs that the new regulation essentially borrows some of the best elements from existing securitisation regulation, including the flexibility that securitisation vehicles provide for asset purchases. However, he suggests that the main beneficiaries of the regulatory changes will be in the private debt space.

He says: "Ultimately, the new vehicle will help with the purchasing of private debt, harnessing the flexibility of both securitisation and fund structures. The new fund won't have the ability to create tranches, but could be utilised in private investments without tranching."

For the year ahead, Fryszman says he will be focusing on developing the private debt side of the business, along with enhancing the existing fund range. He suggests that securitisation of consumer loans and mortgages will continue to be growth areas in Europe and adds that non-performing loans are also an area that is of growing interest.

He says that his firm "may look at the asset class, although it requires thorough analysis of the underlying performance and special servicing. While it is an opportunity that has been much talked about, large volumes of NPL securitisation in Europe remain to be seen."

Fryszman adds that synthetic securitisation is something his firm is also looking at in Europe, but notes that extra care is needed. He concludes: "One needs to take a very disciplined approach to synthetics now; much more so than pre-crisis, which is something seen across the market."

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Structured Finance

'Academic' SBBS to 'lack demand'

A European Systemic Risk Board task force has published a paper arguing that European safe bonds, SBBS (SCI 7 July 2017), are a plausible concept under "certain conditions". The programme has its critics, however, who suggest that the bonds may be plausible from an academic perspective but lack any demonstration of how they may work in practice.

The ESRB paper suggests that the proliferation of SBBS could potentially improve stability in the banking system. They could be also used as an alternative for banks that currently buy higher risk bonds, including Greek or Italian paper.

Jean Dermine, professor of banking and finance at INSEAD, comments that the programme could be a positive for Europe if there is strong demand and resulting liquidity. This could be a positive, he says, as it might give banks an alternative to German 'safe' bonds.

Dermine argues, however, that the concept of demand for the SBBS product is presumptuous and, fundamentally, misguided. Instead, he does not believe that there would be appetite for such a product - particularly from lower rated banks - because the cost of holding the bonds would be greater than the likely low returns they would receive.

Additionally, he posits that liquidity may be scarce as a result of an inability to accurately assess credit risk. "Another issue is that liquidity will be needed for the success of the product. But while I can see that the senior tranche will be very liquid, I can't see the junior tranches being liquid when they would be of higher risk to invest in, particularly when you can't price the credit risk on lower tranches. It would be very hard to gauge the risk involved, as there would be very little information on credit risk correlation between jurisdictions."

The professor adds that the SBBS programme's success may negatively impact the incentive for governments to apply a haircut on their sovereign bonds or to default on them. Instead, argues Dermine, governments may be tempted to simply default on the risky tranches of these 'safe' bonds instead.

He mentions, however, that the demand dynamic for these bonds might change if the Basel Committee passes a possible rule "imposing capital requirements on holdings of local currency government bonds." He continues: "Currently, the capital charge is 0% on such holdings. If a change of regulation happens, it could drive demand for an SBBS product."

Dermine indicates that it isn't the government's job to intervene in this manner, but it should be left to the market. He adds: "The ESRB SBBS framework was inspired by academics. If it creates an interesting framework, it does not explain where the demand would come from...I don't think it would have a negative impact on securitisation, but it should be left to the markets to shape securitisation."

In line with this, Dermine takes issue with the ECB's encouragement of banks to securitise their NPL portfolios. He concludes: "I think this should be left to the banks to decide if they should securitise or keep them on their books. It's not always a best solution to securitise, mainly because banks will always sell the NPL portfolios at a large discount to investors. Sometimes, however, it is more cost effective for the banks to hold the bad loans and work them out."

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RMBS

'Test case' mortgage deal disclosed

Permanent TSB unveiled this week its Project Glas portfolio of distressed mortgages, as the Irish lender seeks to offload approximately €4bn of non-performing loans. The portfolio is understood to comprise a mix of buy-to-let and home loan assets and is being seen as a test case for further Irish NPL issuance.

"This is the first jumbo mortgage NPL deal in Ireland, so it is a bit of a test case," confirms Tom McAleese, md at Alvarez and Marsal. "Buy-to-let mortgages has been a more popular asset class compared to home loan mortgages. They can be worked out quicker, as there are less legal restrictions, and investors can appoint a fixed asset receiver to control and dispose the property where a consensual deal cannot be achieved."

The scenario differs markedly with home loan books. He notes: "In an NPL mortgage deal, it's different, as the borrower has better protections through the Irish central bank's code of conduct of mortgage arrears."

The CCMA, which was introduced in January 2011, lays out enforcement restrictions on lenders dealing with borrowers that have outstanding payments on their mortgage. In this respect, collateral enforcement of mortgages can potentially take up to seven years before investors realise any cashflows, notwithstanding burdensome conduct requirements.

Legal and enforcement challenges, however, appear in other jurisdictions, such as Italy. This issue hasn't prevented private equity investors from pursuing out-of-court settlements in that jurisdiction. The difference with Ireland, though, lies with the type and performance of the assets.

Harish Kumar, md at Alvarez and Marsal, explains: "Irish transactions are being done at relatively lower IRRs, compared to Italy. Italian portfolios have also been sold at a higher discount, given the high number of unsecured SME/corporate positions."

These issues beg the question as to how investors can navigate the challenges. One solution may be Ireland's mortgage-to-rent scheme, a government initiative aimed at homeowners that are at risk of losing their home.

Under the scheme, the borrower voluntarily surrenders possession of their home to their mortgage lender (or an investor), which immediately sells it to a housing association. The latter, in turn, rents it back to the borrower. The borrower can no longer own their property, but they can continue living in their home as a social housing tenant, while having a tenancy agreement with the housing association.

"It can offer an exit for investors, who can sell the asset to the local authority, while addressing that authority's social housing requirements," states McAleese.

Against this backdrop, prospects for the securitisation of Irish mortgage NPLs have been improving. Portfolio sales and potential securitisations are expected to increase on the back of an improving property market, stable economic performance and ECB pressure to clean up balance sheets quickly.

A reduction in unemployment, muted inflation and rising house prices are supportive of delinquent borrowers restarting their payments. Accordingly, now that the loans are to an extent re-performing, DBRS suggests that they can be quite an appealing investment - especially if they can be ultimately financed through the securitisation markets.

ECB data shows that the NPL ratio in Ireland decreased from 14.6% in June 2016 to 11.6% in June 2017. According to the European Commission's first progress report on the reduction of non-performing loans in Europe, a substantial part of this reduction has been due to the widespread use of loan restructuring solutions. Of the remaining €34bn NPL stock, as of September 2017, approximately 65% are mortgages and approximately 45% of these mortgages have been restructured.

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Capital Relief Trades

IFRS 9 credit event pay-out challenged

Synthetic securitisations are unlikely to trigger CDS credit events following an increase in IFRS 9 provisions, given that such events are expected to be traditionally defined. Capital relief trade issuers therefore do not expect much disruption from IFRS 9 transactions, other than the added benefit of mitigating the accounting standard's provisioning impact.

"The transition from stage one to stage two is an accounting rule that will likely be driven by a weakening of the borrower's credit profile, but the client remains performing. The transition is simply an accounting procedure that must be flagged by the bank," says one portfolio manager at a large European bank.

IFRS 9 introduces a forward-looking view of credit quality, under which banks are required to recognise impairment provisions and corresponding impairment losses before the occurrence of a loss event. This is reflected in the standard's three credit stages, with stage two requiring banks to provide for lifetime expected credit losses when there is a significant decline in creditworthiness but a loss event has not yet occurred (SCI 23 June 2017).

The portfolio manager continues: "Under a traditional synthetic securitisation, you aren't entitled to enforce the guarantee, since a standard credit event can only occur if there is - as per the CRR definition - a restructuring, failure to pay or bankruptcy event."

These statements may assuage concerns regarding the structure of IFRS 9 transactions, the main challenge of which is deemed to be the definition of a credit event. Compared to traditional synthetic securitisations, the trigger point for IFRS 9 transactions is a rise in provisioning after a loan has become impaired, rather than a typical credit event.

Provisions increase when an asset moves from stage one to stage two, at which point lifetime loan-loss provisions must be made. Consequently, definitions of credit events might have to be adjusted, given that current definitions are driven by regulatory capital requirements rather than accounting principles (SCI 20 December 2017).

A case in point are unlikely to pay or doubtful loans. In certain cases, banks may be forced to flag a loan as unlikely to pay - even if the borrower is performing - if that borrower defaulted on another loan with another bank.

If this is captured by credit bureau systems, the bank's risk management is then obliged to flag the loan as non-performing from a regulatory perspective. From an accounting point of view, it will have to raise provisions - although as the borrower remains performing, provisioning increases would not necessarily trigger a pay-out.

Accordingly, the portfolio manager notes: "We, as an issuer, have received pitches for such deals, where credit event pay-outs are synchronised with IFRS 9 provisions. In practice, how you define the credit event is a trivial matter, but we decided to opt out of these deals. The main issue is that transactions where credit events are not traditionally defined are unlikely to be granted SRT status under CRR rules."

He continues: "When you do a synthetic capital relief trade, you need to ensure that SRT is achieved by transferring the credit risk (expected and unexpected losses), which you then report as risk weights on the tranches. This is a loss transfer, whether it is done for regulatory capital or provisioning purposes."

However, even if credit events are not an issue, the complexity of addressing the complex calculations of the accounting standard remains. Given that they are forward-looking, IFRS 9 calculations are inherently more complex than current IRB calculations. Consequently, convincing an investor to rely on internally modelled losses will be challenging.

This aspect was highlighted in the Single Supervisory Mechanism's thematic review on IFRS 9. According to the review, impairment measurement is considered to be the most challenging feature of the accounting standard, which requires significant changes to an institution's internal processes and systems.

From a quantitative perspective, the Common Equity Tier 1 ratio is estimated to be 40bp for significant institutions and 59bp for less significant institutions. The ECB's significance criteria include size, economic importance, cross-border activities and direct public financial assistance.

In response to the implementation of IFRS 9 last month, the EU has developed a transitional relief model for financial institutions. Under the proposal, where IFRS 9 impairments cause an institution's CET 1 capital to drop, it will be allowed to add back in a portion of the impairments for a transitional period. The European Parliament has proposed the introduction of a transition period of up to five years, beginning this year.

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Structured Finance

SCI Start the Week - 12 February

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

Pipeline
It was yet another busy week of pipeline additions. There were nine ABS, 11 CLOs, three CMBS and five RMBS.

The ABS were: US$550.94m ARI Fleet Lease Trust 2018-A; US$500m Credit Acceptance Auto Loan Trust 2018-1; €738.8m Driver Fourteen; €1.5bn FADE Series 32; US$1.25bn GM Financial Automobile Leasing Trust 2018-1; US$507.47m Navient Private Education Refi Loan Trust 2018-A; US$230m Orange Lake Timeshare Trust 2018-A; Private Driver UK 2018-1; and US$1.1bn Vantage Data Centers Issuer Series 2018-1.

The CLOs were: US$480.4m AREIT 2018-CRE1; €469m Avoca CLO XV (refi); Babson Euro CLO 2018-1; Bain Capital Euro CLO 2018-1; US$510.2m BDS 2018-FL1; Bosphorus IV CLO; €362m Euro-Galaxy VI CLO; GoldenTree Loan Management EUR CLO I; Penta CLO 4; Providus CLO 12; and Toro CLO 5.

US$1.5bn Benchmark 2018-B2, US$124.45m Natixis Commercial Mortgage Securities Trust 2018-ALXA and US$236m VB-S1 Issuer Series 2018-1 constituted the CMBS. The RMBS were US$381.54m EverBank Mortgage Loan Trust 2018-1, US$487.7m Flagstar Mortgage Trust 2018-1, US$430m NRZ 2018-PLS2, US$345.5m Progress Residential 2018-SFR1 and Sapphire XVIII 2018-1.

Pricings
There was a more even distribution of deals departing the pipeline. There were seven ABS prints along with five CLOs, five CMBS and three RMBS.

The ABS were: US$750m Ally Master Owner Trust Series 2018-1; €653m Bumper 10; US$305.694m CCG Receivables Trust 2018-1; US$544.83m GreatAmerica Leasing Receivables Funding Series 2018-1; US$200m PFS Financing Corp Series 2018-A; US$400m PFS Financing Corp Series 2018-B; and US$750.41m Volvo Financial Equipment Series 2018-1.

The CLOs were: US$510m Atlas X; €458.3m Barings Euro CLO 2018-1; US$368.1m VMC Finance 2018-FL1; US$421.6m Voya CLO 2016-1 (refi); and US$461m ZAIS CLO 8.

The CMBS were: US$400m BBCMS 2018-RRI; US$195m CFCRE Trust 2018-TAN; US$189.1m CGCMT 2018-TBR; US$471m InTown Hotel Portfolio Trust 2018-STAY; and US$395m JPMCC 2018-ASH8.

Lastly, the RMBS were: US$1.494bn CAS 2018-C01; US$916.6m Invitation Homes 2018-SFR1; and A$2.03bn National RMBS Trust 2018-1.

Editor's picks
Carillion impact gauged: Capital relief trade issuers and investors have been assessing the effect of Carillion's default on the market, following news of its impact on HSBC's Metrix transaction (SCI 19 January). Market consensus indicates that such a default is an idiosyncratic event...
Gearing up for green: Two pilots funded by Horizon 2020 - the EU programme for research and innovation - are set to launch next month that should boost the development of green securitisation in Europe. One is a project to develop PACE ABS across the region and the other aims to create a standardised energy efficient mortgage...
Key CMBS pillars hold steady: New US CMBS transactions are generally seeing signs of improving credit quality. This challenges recent rating agency criticisms that there has been a fall in the quality of the underlying loans...
GNMA aims to stop churn: In a move which should be a net benefit to RMBS, Ginnie Mae has taken steps to address churning in its RMBS programme, both to keep mortgage rates affordable and to preserve liquidity in the security. To that end, it has notified a "small number" of issuers who are outliers among market participants in the Ginnie Mae multi-issuer MBS on the metric of prepayment speeds that such deviations from market norms are not acceptable...
Intesa leads asset management shift: Intesa Sanpaolo announced this week a four-year plan to halve its non-performing loan exposures by 2021 by boosting fee income and selling its servicing platform. The lender has led the shift in fee-earning businesses among Italian banks, which coincides with low interest rate pressure on interest margins and ECB demands for a reduction in bank NPL volumes (SCI 4 October 2017)...

Deal news
• Navient is tapping the ABS market for the first time after acquiring online lender Earnest. Its latest US$507.47m transaction, dubbed Navient Private Education Refi Loan Trust 2018-A, is backed by fixed-rate refinanced student loans first originated by Earnest and subsequently acquired by Navient to circumvent competition clauses since its split from Sallie Mae last year.
• Blackstone is tapping the market with a €403.81m Italian CMBS. The transaction, dubbed Pietra Nera Uno, is a securitisation of three senior commercial real estate loans and two pari passu-ranking capex facilities advanced to three Italian borrowers.
• The IBRD has printed the largest sovereign risk transfer transaction ever and the second-largest catastrophe bond issuance. The landmark deal provides US$1.36bn in earthquake protection to Mexico, Chile, Colombia and Peru, marking the first time the latter three countries have accessed the capital markets to obtain insurance for natural disasters.

Structured Finance

Call for consolidation

Bank of Italy governor Ignazio Visco has called for Italian bank consolidation in order to tackle subdued profitability owing to, among other factors, higher provisions associated with non-performing loan disposals. Consolidation could improve the already buoyant issuance of NPL transactions.

The central bank governor states that although profitability over the coming years should be sustained by a reduction in loan loss provisions and asset management fees (SCI 9 February), regulatory changes and additional write-downs made in connection with the sale of NPLs could affect loan loss provisioning, notwithstanding competition in the asset management industry. "Banks must therefore take action on several fronts to recover profitability and competitiveness. This means cutting expenses further, merging or entering into consortiums to exploit cost and revenue synergies," he notes.

Visco points to Italian mutual banks (so called BCCs), in particular, as a case in point. He observes: "BCCs are now facing an NPL ratio that is more than two percentage points above the average and substantially lower coverage ratios. The implementation of the reform of the sector - and the creation of cooperative banking groups - must be swiftly carried out, if the BCCs are to overcome the disadvantages of their small size and continue to support the local economy."

Yet progress in stabilising the banking sector, along with better-than-expected economic growth has restored investor appetite for Italian assets. Gains have been driven by banks: lenders were back in the spotlight after the government committed as much as €17bn to wind down the Veneto banks last year and nationalising Banca Monte dei Paschi di Siena. Those actions appear to have addressed what were considered to be the main systemic risks for the Italian banking industry.

Still, Italian banks are weighed down by more than €270bn of non-performing loans, more than twice the amount of NPLs held by lenders in any other EU jurisdiction. In the coming weeks, the European Commission and the Single Supervisory Mechanism will finalise their proposals for writing down non-performing loans over time (calendar provisioning) (SCI 4 October 2017).

Visco says that a reduction in NPLs is necessary to lower banks' risks and funding costs. However, he cautions: "This should be pursued through measures that take into account the fact that starting conditions are sustainable and do not have potentially destabilising pro-cyclical effects. They should also ensure a level playing field to banks operating in different environments, especially in terms of a swift and efficient civil justice system - something Italy still needs to improve on."

According to the ECB's chief supervisor Daniele Nouy, the ECB's new rules forcing lenders to set aside more capital for NPLs may come into force on 1 April, three months later than originally planned. Following widespread condemnation from southern European countries, the ECB was forced to rethink its proposal and while no fundamental change in the proposal is likely, the central bank is expected to refine its text accordingly.

The new rules will be unveiled by mid-March. As part of the clarification, the ECB is expected to stress that the rules will be applied on a bespoke basis and there will be no automatic provisioning, a move that was seen as encroaching on regulatory or legislative prerogatives.

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CMBS

CRE CLOs quick off the line

Two more firms have launched inaugural CRE CLOs, with a US$480.4m transaction from Argentic Silverpeak and a US$510.2m transaction from Bridge Investment Group. The transactions are further examples of a surge in CRE CLO issuance since the start of 2018, indicating a trend of investment firms favouring the CLO structure over traditional CMBS, particularly due to the flexibility the structure offers for financing transitional properties.

A handful of CRE CLOs have hit the market so far this year. The trend is being driven by a combination of significant investor demand for floating-rate product, issuer interest seeking to diversify funding sources and secure term financing, and reduced cost of funds from securitisation due to tighter spreads.

Wells Fargo CMBS analysts note that CLOs provide an appealing alternative to floating-rate single-borrower CMBS in the CRE arena and help reduce "credit drift" through tighter constraints on discretionary management. CRE CLOs are also often backed by fully identified collateral with no ramp-up period, with changes in pool collateral usually serving the purpose of limiting prepayment risk.

The debut CRE CLO from Argentic Silverpeak, dubbed AREIT 218-CRE1, has been provisionally rated by KBRA as triple-A on the US$254.60m class A notes, triple-A on the US$42.033m class AS notes, double-A minus on the US$27.622m class B notes, single-A minus on the US$25.820m class C notes, triple-B minus on the US$36.629m class D notes, double-B minus on the US$16.212m class E notes and single-B minus on the US$19.816m class F notes. There is an unrated US$57.645m class G note.

AREIT 2018-CRE1 is expected to be collateralised by 19 mortgage assets consisting of 10 whole loans and nine participations in whole loans secured by properties based in eight states. Of these, the largest exposures are in New York, California and Michigan, and of the six property types, the three largest exposures are retail, lodging and office. The loans were all originated by Argentic Real Estate Investment Trust (AREIT).

KBRA has also provisionally rated the inaugural US$510.2m deal from ROC Debt Strategies, dubbed BDS 2018-FL1. These are triple-A on the US$275.525m class A notes, double-A minus on the US$28.701m class B notes, single-A minus on the US$29.338m class C notes, triple-B minus on the US$45.283m class D notes, double-B minus on the US$22.323m class E notes and single-B minus on the US$24.873m class F notes. There are also US$84.188m in preferred shares.

BDS 2018-FL1 will be collateralised by 27 loans secured by 31 properties located in 15 states, with the three largest exposures consisting of New York, California and Arizona. The pool has exposure to four property types: multifamily, office, retail and mixed-use.

The loans were originated by either BDS II Mortgage Capital JPM or ROC Debt Strategies II Mortgage Capital WF, each of which is a subsidiary of ROC Debt Strategies Fund II REIT or Bridge REIT. Bridge REIT invests in a diversified portfolio of commercial real estate debt across the US and is a subsidiary of Bridge Debt Strategies Fund II, an affiliate of Bridge Investment Group.

The Wells Fargo analysts forecast CRE CLO issuance to reach US$10bn this year, building on 2017, when 19 deals priced for US$7.9bn.

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RMBS

Longer WAL RMBS preplaced

Obvion has preplaced a static RMBS that does not feature a time call option. Dubbed FORDless Storm 2018, the €1.41bn securitisation is backed by mortgages on residential properties located in the Netherlands extended to 6,863 prime borrowers.

The transaction is similar to other funding deals from the Storm programme, but has no step-up language and the underlying pool is not revolving. However, the issuer can substitute any loans repurchased by the seller due to breaches in R&W and, subject to certain conditions, purchase further advances granted to the borrowers (limited to 2% per year, up to a total of 10% of the closing balance) until the clean-up call option date.

Moody's notes that adding new loans to the pool could lead to a deterioration of the pool quality over time. The agency warns that the risk is greater in this transaction than in comparable Dutch RMBS transactions with static pools because the period during which such changes are permitted is significantly longer. In comparable transactions, such changes are generally permitted for up to five years from closing until the first optional redemption date.

Approximately 33.70% of the loans in the pool were originated in 2017, while approximately 39% were originated prior to 2009. A fifth of the collateral benefits from the NHG guarantee.

There are no loans in arrears and almost 85.26% of the loans have never been in arrears. The weighted average current LTMV is 85.76%, with just shy of half of the pool reporting a current LTMV of between 90%-110%. Full interest-only loans account for 11.58%.

The WA remaining term of the portfolio is 23.42 years, while the WA seasoning is 5.93 years. Around 18.63% of the assets are concentrated in the Noord Brabant region, with high concentration also in Noord Holland (16.1%), Zuid Holland (15.9%) and Gelderland (11.5%).

Only the €1.25bn class A notes were sold to investors, while the mezzanine and junior tranches were retained. Rated triple-A by Fitch, Moody's and S&P, the 10.4-year senior notes priced at three-month Euribor plus 70bp, reflecting the long WAL. The class B to E notes are rated from AA+/Aa1/AA+ to NR/Baa3/NR and have coupons from plus 200bp to plus 600bp.

All classes of notes have a legal final maturity of February 2054. Rabobank was arranger on the deal and co-manager, alongside JPMorgan.

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Structured Finance

Market moves - 16 February

EMEA

Fulcrum Asset Management has recruited Mark Horne as a director within the newly created Fulcrum Alternative Strategies team, reporting to partner Matthew Roberts. Horne previously worked as an independent asset management consultant in London and Paris. Prior to that, he was a senior credit manager researcher at Willis Towers Watson and was director of client services at Natixis Global Associates.

REYL & Cle has appointed Ante Razmilovic to head its new structured finance busines to be run from its London office and part of the corporate advisory and structuring business line. Razmilovic was most recently md at Goldman Sachs in London and Hong Kong.

Hymans Robertson has hired Michael Abramson as partner. He was previously director of wholesale transactions at Prudential.

North America

Ares Management has hired Myles Gilbert as partner, head of investor strategy and solutions. Gilbert was previously md at Cambridge Associates and co-chairman of its credit investment committee.

Blackstone president and coo Tony James is set to be replaced by Jon Gray, global head of real estate. James will assume the title of executive vice chairman, with both James and Gray reporting to co-founder, chairman and ceo Stephen Schwarzman. Ken Caplan (senior md and global cio of the real estate group) and Kathleen McCarthy (senior md and global coo of Blackstone Real Estate) have been named global co-heads of real estate, succeeding Gray. Gray - who is a member of the firm's board and management committee, and will remain chair of the real estate investment committee - began at Blackstone in 1992 in the private equity and M&A areas of the firm, before joining the real estate group at its inception and leading it since 2005. James joined Blackstone in 2002 as vice chairman and coo, and assumed the title of president in 2006, upon the retirement of co-founder Peter Peterson.

MPLF listed

Marble Point Loan Financing has listed on the specialist fund segment of the London Stock Exchange with a market capitalisation of US$205.7m and 205,716,892 ordinary shares in issue. The closed-ended investment company is invested in a diversified portfolio of US dollar-denominated broadly syndicated floating rate senior secured corporate loans via CLOs and related vehicles managed by Marble Point Credit Management and its affiliates. The company raised gross proceeds of US$42.5m through its IPO and expects to use the net proceeds to repay US$6.5m of outstanding indebtedness, to gain additional exposure to loans and for general working capital purposes.

Mortgage merger

WMIH Corp and Nationstar Mortgage Holdings have entered into a merger agreement, whereby the operating business will retain the Nationstar Mortgage name and Dallas headquarters, and its senior leadership team will head the combined company. The combined company's board will comprise three members from WMIH and four from Nationstar. Under the terms of the agreement, Nationstar shareholders may elect to receive US$18 in cash or 12.7793 shares of WMIH common stock for each share of Nationstar common stock they own. Upon completion of the transaction - which is anticipated in 2H18 - Nationstar shareholders will own approximately 36% of the combined company (receiving an aggregate consideration of US$1.2bn) and WMIH shareholders will own approximately 64%. In addition, approximately US$1.9bn of Nationstar's existing senior unsecured notes will be refinanced at closing.

EeMAP consultation

The Energy Efficient Mortgages Action Plan (EeMAP) consortium has launched a consultation on guidelines for a pan-European energy efficient mortgage pilot scheme (SCI 6 February). Running until 12 March, feedback is sought on three areas: implementation guidelines for lending institutions; building performance assessment criteria; and valuation and energy efficiency checklist. The final guidelines will be unveiled on 14 June, marking the official start of the pilot scheme. The pilot will test the energy efficient mortgage product blueprint with key stakeholders and involve collecting and analysing loan data to substantiate the correlation between energy efficiency and reduced levels of risk.

CMBS settlement

The US SEC has instituted an enforcement action against Deutsche Bank Securities, which has agreed to repay more than US$3.7m to customers, including US$1.48m that was ordered as disgorgement. The SEC's investigation found that traders and salespeople made false and misleading statements to the detriment of its customers while negotiating sales of CMBS. The order finds supervisory failures by Deutsche Bank's former head CMBS trader, Benjamin Solomon, who allegedly did not take appropriate action after becoming aware of false statements made to customers by traders under his supervision. To settle the charges, the bank agreed to reimburse customers the full amount of firm profits earned on any CMBS trades in which a misrepresentation was made and will pay a US$750,000 penalty. Solomon agreed to pay a US$165,000 penalty and serve a 12-month suspension from the securities industry.

Green investment

The Clean Energy Finance Corporation has disclosed it made a A$25m cornerstone investment in the A$300m green tranche of NAB's latest Australian RMBS, National RMBS Trust 2018-1. The class A1G notes - which have been certified by the Climate Bonds Initiative as meeting its low carbon buildings criteria - priced at one-month BBSW plus 85bp, the same as the deal's senior class A1A notes. Both tranches have a three-year WAL and are rated triple-A by Fitch and Moody's. FlexiGroup has previously issued green tranches in its 2016 and 2017 securitisations (see SCI's primary issuance database).

CDO transfer

Dock Street Capital Management has replaced Cairn Capital as collateral manager of Reservoir Funding. Cairn previously replaced Cutwater Asset Management as collateral manager of the ABS CDO in 2015 (see SCI's CDO manager transfer database).

Acquisitions

Nelnet has completed the acquisition of 100% of the stock of Great Lakes Educational Loan Services. Fitch comments that there will be no rating changes on outstanding transactions currently serviced by Great Lakes as a result of this change of control.

Partnerships

Terra Capital Partners has entered in an investment and partnership agreement with Axar Capital Management. At Terra, Bruce Batkin will remain ceo, Dan Cooperman will remain chief originations officer, Greg Pinkus will remain cfo and co-founder, Simon Mildé, will become vice chairman. Vik Uppal, Axar's head of real estate, will join Terra full time as cio and a member of the board of directors. Prior to Axar, Uppal was an md on the investment team at Fortress Investment Group's credit and real estate funds and co-head of North American real estate investments at Mount Kellett Capital Management. The transaction was approved by special committees consisting entirely of independent directors of two of the Terra investment vehicles.

Law firm established

Faith Gay and Philippe Selendy have formed Selendy & Gay, a new litigation firm headquartered in New York City and staffed by ex-Quinn Emanuel lawyers. Gay previously served as deputy chief of special prosecutions in the Eastern District of New York, while Selendy was the chair of securities and structured finance at Quinn Emanuel. The other founding partners of the firm comprise former co-chair of Quinn's investment fund litigation practice David Elsberg, as well as Jennifer Selendy and Andrew Dunlap. Christine Chung, Maria Ginzburg, Sean Baldwin, Jordan Goldstein and Yelena Konanova have also joined the firm.

Mortgage firm launched

Ex-Clayton Holdings executives Mark Hughes, Ann Gibbons and Tom Donatacci have formed a new mortgage due diligence firm called New Diligence Advisors (NDA), with Selene Holdings as principal investor. Hughes serves as coo of NDA, reporting to Selene ceo Joe Pensabene, who is also ceo and president of NDA. The firm is currently in discussions with rating agencies and expects to be approved as an accredited third-party review provider for securitisations by mid-year.