Contents

CDO

Bridge-loan lifeline

Greystone closes CRE CLO milestone

Greystone Bridge Lending Fund last month completed its second CRE CLO (see SCI’s primary issuance database). Dubbed Greystone CRE 2018-HC1, the US$300m transaction is unique in that it is 100% secured by healthcare properties.

“The Greystone CRE CLO is the first-ever CRE CLO to be backed entirely by CRE loans secured by healthcare properties,” says Clifford Chance capital markets partner Steven Kolyer. “It represents another milestone in the re-ascendance of the market for CRE CLOs.”

The transaction is backed by an initial US$249.2m portfolio of commercial mortgage healthcare assets and a US$50.8m reserve for additional healthcare assets to be acquired during the ramp-up period. The closing pool is collateralised by 20 whole loans secured by 25 healthcare facilities.

CRE CLOs are viewed by lenders like Greystone as a more flexible financing tool than CMBS. CRE CLOs also tend to be of a shorter duration than CMBS and have larger assets on an individual basis.

“The typical CRE assets in a CRE CLO are CRE bridge loans, which are loans to borrowers that are renovating, refurbishing or repositioning commercial properties,” explains Kolyer. “The loans are generally floating rate, for a period of three to five years.”

A CRE CLO may be static, but more often is managed, with mechanisms for replacing loan assets that repay or are sold. He continues: “A CRE CLO is more flexible than a typical CMBS, where the loan assets involve more stabilised properties and the deal itself is static. The loan assets typically involve underlying properties in various sectors, such as multifamily, retail, office and hospitality.”

The bridge loans backing the deal are typically secured by properties that are in some form of transition and, as such, may require flexibility to achieve their sponsor’s business plans. These structures also provide more flexibility relating to asset management and asset workout relative to REMICs, which do not provide for future funding, an essential element of bridge financing.

Kolyer notes: “US CRE CLOs, which in a different form pre-dated the credit crisis, began to re-appear in 2012. Issuances were occasional until a pick-up in 2015, followed by a continued sharp growth in 2017 and 2018.”

Pre-crisis, CRE CLO issuance stood at around US$35bn a year. Today, the yearly issuance equals over half that amount - US$12bn to US$15bn by KBRA estimates.

New opportunities in the sector stem from the esoteric nature of the asset class. “A CRE bridge loan in the healthcare sector is typically secured by a senior living facility, assisted living facility or skilled nursing facility,” says Kolyer. “In skilled nursing, more substantial healthcare services are provided to the residents, and service providers are frequently reimbursed through programmes like Medicare and Medicaid. Accordingly, such facilities are subject to more substantial regulation and operational risks than other types of CRE properties. Nevertheless, healthcare bridge loans are viewed as an attractive, though complex, sector of the CRE bridge lending market.”

Many lenders in the traditional sector have been attracted to non-bank lending by the persistent bull market in the past few years, which has contributed significantly to the growth of the CRE CLO market. The amount of exposure taken on by lenders is also significant compared with other market sectors, meaning that most managers have high amounts of skin in the game with every transaction they undertake. Kolyer, for example, hints that some sponsors have exposure of up to 30%.

“With CRE bridge lending expected to remain active for a long time and the steady growth in volume and market acceptance of CRE CLOs, the occurrence of additional CRE CLOs backed by healthcare properties seems certain,” he says.

Certainly, further issuance from Greystone is expected in the future.

Moody’s assigned a Aaa rating to 2018-HC1’s US$123m class A notes, which priced at one-month Libor plus 155bp with a 4.5-year WAL. The transaction also comprises unrated US$42m class AS notes, US$27m class Bs, US$18m class Cs and US$37.5m class Ds. JPMorgan was arranger on the deal.

Tom Brown

Structured Finance

Heightened holding

European ABS market update

Invesco is preparing a new €410m European CLO deal, along with GSO Capital Partners, which is planning a CLO reset. Elsewhere, Och-Ziff’s latest OZLME deal is reported to be sized at €412m (see SCI’s deal pipeline).

Overall European CLO spreads remain unchanged to slightly wider, as only a handful of bonds are out for the bid today. Meanwhile, in the European ABS market, there appears to be less interest in triple-B and single-A paper, whereas demand for triple-A and double-B notes has increased.

“A lot of buyers are buying and holding paper because everything is clearing in the primary market,” says a trader. “New issue talk and prices are both widening. There was a big sell-off last week and it looks like we might be in line for another one in two to three weeks’ time.”

In the UK market, some new issue sterling bonds are being discounted, according to the trader.

Tom Brown

CLOs

Mixed paper

US CLO market update

A BWIC of 68 line items is driving US CLO secondary market activity today, amidst a scarcity of primary issuance (see SCI’s BWIC calendar).

“We are seeing a clean-up of triple-A to single-A notes. There is also a large double-B block out today; a mixed bag of names,” says one trader.

He continues: “I am not sure if those are going to trade well. The way they are treated will provide a good indicator of risk appetite.”

Double-B bonds have otherwise been trading successfully and many relatively lower offers have been matched with demand, which the trader suggests is a sign of market health. “Equity has also been trading quite well so far, as a lot of people are looking for yield - another good sign,” he adds.

Meanwhile, in the primary market, triple-A spreads are drifting a bit wider. The trader confirms that there is a general slowing-down in CLO refinancings and resets.

“The market is self-correcting. That will help structure and keep spreads tighter, based on deal scarcity,” he says.

Tom Brown

CLOs

Eastern incentive

European CLO market update

The European CLO market appears to be softening, following high volumes of equity out for the bid in the US secondary market.

“The theme of the week could be that good CLO managers are faring a lot better than bad managers,” says a trader. “That was not the case six months ago.”

It is also being suggested that managers with links to Asian money, particularly Japanese banks, are receiving preferential treatment. “It is a lot easier to get a deal done at the moment if you have connections with Asian investors,” says the trader. “The significant Asian bid for triple-A paper continues. But perhaps this is just a distinction between good and bad managers.”

The size of mezzanine tranches is reported to be smaller today than previously, which is putting pressure on some managers. “Mezz is not flying out of the window at the moment,” the trader confirms.

The trader predicts that the amount of refinancing and reissuance seen in the CLO market will decline in the near future. “We are seeing new issue CLOs print at the moment - not a lot, but I would suggest that the refis and resets will drop off eventually.”

Tom Brown

CLOs

Reset end point?

US CLO market update

With almost 40 bonds out for the bid today, the secondary US CLO market is seeing heightened activity, with a bias towards triple-A paper. The stock market sell-off has not yet translated into wider spreads across the sector.

“There has been a strong bid for interest loans as people have been using them as a hedging tool,” says one trader. “Spreads have drifted wider over the last month and the arbitrage has become difficult. It may start to suppress new issue supply.”

Push-back from equity investors is increasing, according to the trader. “Many potential issuers are weighing up whether it might be better to wait until 1Q19. Earlier in the year, it was a no brainer to do a reset, but now that is slowly starting to drop off. It looks like we might be getting to the end point.”

Tom Brown

Structured Finance

SCI Start the Week - 22 October

A review of securitisation activity over the past seven days

Market commentary
European primary ABS activity continued to be robust last week. The BPCE Home Loans FCT 2018 print and the announcement of Porsche’s Austrian auto ABS were among the highlights (SCI 18 October).

“A variety of asset classes are represented in the primary market at the moment,” said one trader. “Spreads are well supported – we’re seeing good levels for the most part and nothing appears to be oversubscribed [SCI 17 October].”

Refinancing remains an ongoing feature of the European CLO market, but new issue deals are starting to emerge. “There are a couple of new CLO deals coming out,” the trader added. “There are rumours that a Spanish SME CLO - which has been talked about for ages - might see the light of day, but I’ll believe it when I see it.”

With a slew of new issues pricing, investors were putting their energy into primary rather than secondary markets. Nevertheless, issuance activity remained fairly muted among Southern European names and spreads appear rangebound for now (SCI 19 October).

“Because we are in the last few months of the year, people know that whatever they have done so far, they will have to stick with,” the trader concluded. “They cannot change their numbers. At this point, people are forcing themselves to be fine with the positions they have.”

Transaction of the week
Sumitomo Mitsui Banking Corp (SMBC) is prepping a €20bn dual-recourse structured covered bond programme, marking the emergence of a new name and a new jurisdiction to the market (SCI 15 October). The cover assets comprise triple-A rated Japanese RMBS originated by the bank and the deal features an innovative total return swap (TRS) mechanism.

Moody’s has assigned a provisional long-term rating of Aaa to SMBC’s residential mortgage loan covered bond programme, which is expected to benefit from a ¥186.8bn cover pool. There is an LTV cap of 80% for assets included in the pool, to bring the transaction in line with typical European covered bond structures.

Under the programme, the issuer will make all payments of interest and principal on the covered bonds using payments received from SMBC as TRS counterparty. In case of a TRS default event, the issuer will have access to the proceeds from the cover assets (Japanese law-governed senior trust certificates) via either a direct sale of the RMBS or a sale of the underlying residential mortgage loans backing the RMBS to fulfil its obligations under the programme.

The 8,894 mortgage loans backing the RMBS are secured by residential properties in Japan and are mainly floating rate (accounting for 95.4% of the pool), with a WA current LTV of 90.1%, WA seasoning of 0.5 years and a WA remaining term of 31.7 years. The RMBS is issued for the benefit of the issuer and denominated in Japanese yen, while the covered bonds are intended to be issued in foreign currency with bullet maturities, according to Moody’s.

Other deal-related news

• Santander and NatWest have completed two commercial real estate risk transfer transactions and the market is expecting another CRE deal in 4Q18 (SCI 15 October). This marks the second wave of synthetic CRE transactions, which distinguishes itself in the sense that the market may be returning to more traditional capital relief trade structures and investors (SCI 13 July). 
• The US$200m South Plains Mall loan, securitised in CGCMT 2015-GC35, GSMS 2015-GS1 and CGCMT 2016-GC36, is the largest CMBS exposure to the Sears bankruptcy. Sears is set to close at the location as part of its Chapter 11 reorganisation. For more on CMBS restructurings, see SCI’s CMBS loan events database.
• Fitch has issued an unsolicited comment on Galton Funding Mortgage Trust 2018-2, indicating that the prime RMBS allocates greater credit risk to senior bondholders (SCI 18 October). A key structural feature of the transaction is a non-standard risk allocation of unpaid interest on non-performing loans, which is incurred concurrently by all classes through a pari passu reduction in defined bond coupons.
• Ex-LendingClub president Renaud Laplanche’s new firm is in the market with its first unsecured consumer loan securitisation (SCI 18 October). The US$286.39m Upgrade Receivables Trust 2018-1 comprises four classes of notes and is expected to close on 30 October.
• The UK government is readying a £3.88bn securitisation backed by English plan 1 income-contingent loans granted to students whose repayment date fell between 2007 and 2009, the second public transaction of its type (SCI 14 December 2017). Dubbed Income Contingent Student Loans 2 (2007-2009), the deal is characterised by the loans being written-off once the borrowers reach the age of 65 (SCI 17 October).
• Wells Fargo has priced its first post-crisis prime US RMBS (SCI 15 October). Named Wells Fargo Mortgage Backed Securities 2018-1 Trust, the US$441.25m deal securitises 660 first lien residential mortgage loans.
• S&P has downgraded the class D notes issued by the Halcyon 2012-1 and 2013-1 CLOs to single-B from double-B (SCI 18 October). At the same time, it has raised its ratings on the class B notes from the 2012-1 deal and the class A2A, A2B, B and C notes from 2013-1. The upgrades reflect paydowns to the class A1 notes of both transactions, which improved overcollateralisation ratios for all classes except the class Ds.

Data

Pipeline composition by jurisdiction (as of 19 October)

Pricings
Auto ABS prints once again dominated the market last week. A reasonable mix of CLOs, RMBS and CMBS also priced.

The auto-related prints comprised: US$550m Avis Budget Rental Car Funding Series 2018-2, US$1.5bn CarMax Auto Owner Trust 2018-4, US$1.05m Ford Credit Auto Owner Trust 2018-B, US$238.44m GMF Floorplan Owner Revolving Trust Series 2018-3, US$667.63m GMF Floorplan Owner Revolving Trust Series 2018-4, US$750m Nissan Auto Lease Trust 2018-A, US$1.25bn Santander Drive Auto Receivables Trust 2018-5 and €958m VCL 27. The other ABS pricings consisted of: US$344m Ascentium Equipment Receivables 2018-2 Trust, US$118m BXG Receivables Note Trust 2018-A, US$626m Navient Private Education Loan Trust 2018-D, US$200m PFS Financing Corp Series 2018-E and US$200m PFS Financing Corp Series 2018-F.

Among the CLO refinancings issued last were: US$373.25m Arch Street CLO, US$628.3m CIFC Funding 2014-IV-R, US$427.3m Cutwater 2015-I, US$467m Jay Park CLO and US$616.4m Man GLG US CLO 2018-2. The CLO new issues included US$510m BlueMountain XXIII CLO, US$410m LCM 28 and US$614.5m Venture 35 CLO.

€1.13bn BPCE Home Loans FCT 2018, A$1bn Firstmac Mortgage Funding Trust No. 4 Series 3-2018 and US$1bn STACR 2018-HQA2 made up last week’s RMBS prints. Finally, US$1.07bn DBGS 2018-C1 was among the CMBS pricings.

BWIC volume

Source: SCI PriceABS

Podcast
SCI's second podcast episode is now live! This month the team discusses the features which will appear in the next edition of the SCI Magazine, including a profile of the African Development Bank's Room2Run capital relief trade, the role of fintech in marketplace lending ABS and the changing use of credit derivatives. Access it here, or by searching for 'Structured Credit Investor' in Apple Podcasts or Spotify.

Capital Relief Trades

New ground for CRTs

Capital relief trades report now available

CRTs – in which banks transfer credit risk to non-bank investors – have become better established and more widely used. New issuance jurisdictions and greater variety of reference assets, issuers and investors have brought the market into new territory, but the regulatory environment remains challenging and there are concerns that growth could stall.

SCI has published its latest special report on the sector. The report is available here.

The 20-page, 12,000-word report, sponsored by ArrowMark Partners and Caplantic, provides an in-depth exploration of CRTs, including:

• An introduction to the asset class and overview of its development
• The evolving language used to discuss deals as well as changes in the ways deals are structured and what they set out to achieve
• Origination and structuring trends, including new jurisdictions and asset classes
• The changing investor base
• The implementation of Basel 3 and how the market is preparing for Basel 4, as well as other regulatory considerations
• A detailed glossary

Get the report

CMBS

Hitting the mark

Pan-European logistics CMBS prepped

Blackstone is in the market with a €292.79m pan-European CMBS secured by 89 logistics and industrial assets. Dubbed Arrow CMBS 2018, the transaction is the first European post-financial crisis CMBS with a large French asset exposure.

The deal, which is expected to repay on or before 22 November 2023, securitises a 95% interest of a €308.2m senior commercial real estate loan jointly advanced by Deutsche Bank and Société Générale to borrowers in France, the Netherlands and Luxembourg. The loan is owned by a joint-venture company set up by Blackstone Real Estate Partners, holding 95% of the equity, and M7 Real Estate which holds the remaining 5% of equity.

There is an additional €78.1m mezzanine facility not included in the transaction.

The portfolio securing the loan was valued by Cushman & Wakefield at €442m and has assets located across France (accounting for 69.5% of the portfolio by market value), Germany (23.1%) and the Netherlands (7.5%). A large part of the collateral is from the previous loan portfolio sale, Project Aberdonia, which Lloyds sold to Marathon Asset Management in 2014.

There are 89 assets in the portfolio, of which 77 are categorised as logistics, industrial or mixed-use (representing 86.6% of the portfolio’s MV). The sponsor plans to dispose of the portfolio’s non-logistics assets to integrate the remaining part of the portfolio to its pan-European logistics platform.

DBRS estimates that should the 12 assets be disposed of and their release prices paid, the portfolio will slightly deleverage to a 67.7% loan-to-value ratio from 69.7% LTV at issuance.

There is a 36.6% MV concentratation in Île-de-France, which DBRS considers a strong economic region. The majority of assets are located along the French logistic belt, from Lille to Marseille. The German assets in the portfolio are mostly located in the northwestern part the country, whereas most of the Dutch assets are located in the Randstad region.

The portfolio benefits from a high physical occupancy rate of 90.7%.

To address the risk of a safeguard plan (plan de sauvegarde) potentially being imposed by a French court, the sponsor implemented a double-Lux Co structure, which is expected to mitigate the risk of borrowers filing a hostile safeguard. In addition, the loan sellers are expected to benefit from Dailly assignments pursuant the Dailly law, aimed at simplifying the enforcement process.

There is a potential tax liability of €45.6m not including penalty and late interests, inherited from two French portfolios - Aberdonia and Mistral. The liability was caused by the missing or incorrect tax filing by the previous owner, which should have been exempt from such tax. Blackstone has undertaken to correctly file, but there is no guarantee that the French tax authority will not claim amounts based on the missing or incorrect filings for previous years. DBRS assumes that excess cash from the assets would be used to pay the overdue tax, with the remainder deducted from each rating level’s proceeds proportionally.

The agency has assigned preliminary ratings of triple-A to the class A1 and A2 notes, double-A to the class B notes, single-A to the class C notes, triple-B to the class D notes and double-B to the class E and F notes. The senior loan carries a floating interest rate equal to three-month Euribor - subject to zero floor - plus a 1.9% margin.

Tom Brown

Emerging Markets

Credit insurance landmark launched

Transaction continues risk transfer strategy

The African Development Bank (AfDB) and the African Trade Insurance Agency (ATI) have completed a landmark US$500m credit insurance deal, covering approximately 22% of the bank’s US$2.3bn outstanding portfolio of non-sovereign operations in Africa. The deal is intended to protect the bank against non-payment of loans made to around 30 African financial institutions, across all major regions on the continent.

ATI will be the direct insurer for the African Development Bank and the transaction also involves the participation of a number of Lloyd’s & Company private reinsurers who will share the risk on a range of African financial institutions. The deal is expected to create around US$500m of headroom for new lending, while enabling many insurance companies operating outside Africa to participate in financing the development of Africa, for the first time.

Consequently, it is hoped that this deal will strengthen the development of credit insurance in Africa and lead to the development of greater comfort in risk transfer between the African Development Bank, the African Trade Insurance Agency and Lloyd’s reinsurers. Through this, the deal may also lead to the lengthening of insurance terms and lower insurance and financing costs, boosting trade and investment in the private sector and the African region.

The credit insurance deal is the second balance sheet optimisation transaction under the Room to Run initiative, following the landmark US$1bn capital relief trade completed last month (SCI 20 September). Like that transaction, it is hoped that this deal will serve as a blueprint and pave the way for further, similar transactions in future.

Like the CRT, this deal also responds to the G20 and G7 call on the multilateral development banks to explore innovative ways to optimise their balance sheets. Like synthetic securitisation, credit insurance is one such instrument involving a specialised market with currently low penetration in Africa, but which has been earmarked to play a more active role in funding lending and development on the continent.

Richard Budden

Capital Relief Trades

Mixed outlook

Risk transfer diversity set to increase

The outlook for risk transfer issuance volumes is mixed, according to panellists at SCI’s Capital Relief Trades Seminar last week. However, they agreed that the market will continue to increase in diversity, in line with bank origination channels and balance sheet needs.

The traditional Northern European CRT jurisdictions have seen a lot of activity over the last couple of years and there has also been an increase in activity in Italy, Spain and Portugal. Indeed, Daniela Francovicchio, senior structured finance manager at EIF, expects significantly higher risk transfer volumes this year, compared to 2017.

“New counterparties are entering the space,” she observed. “The market is booming, also as a consequence of the new the regulatory changes that are coming into force in 2019.”

Kaelyn Abrell, partner and portfolio manager at ArrowMark Partners, agreed that the risk transfer market is expanding through increasing issuance from longer-term issuers, the entrance of new issuers and a greater variety of reference portfolio collateral types. “Recent activity reflects ongoing maturation and evolution of the asset class,” she stated.

She continued: “At the same time, investors are expanding the size and diversity of their allocations to private credit investments. The SRT market’s growth and development are being supported by an increase in capital available to deploy into the asset class, as well as interest from investors with differing risk and return objectives.”

But David Wainer, partner at Allen & Overy, is less optimistic about activity next year - especially in the first half of the year - due to the new securitisation regulations, particularly the onerous loan level disclosure requirements and higher capital charges.

Nevertheless, a number of banks are already considering what their deals will look like under the new securitisation regulations in order to maintain their efficiency, according to Chorus Capital cio Kaikobad Kakalia. “However, activity in Q1 is likely to be muted, as usual. In 2019, it may be more pronounced, as banks complete their capital planning for the year and adjust for the regulations,” he concurred.

One area that is likely to benefit is the market for mezzanine risk at a high attachment point. “Banks are in the process of implementing changes to their historical issuance approach, which will include selling protection on additional tranches,” Abrell noted. “We invest in first loss and mezzanine tranches to align with the diverse goals of our investors. I anticipate the investor base for mezzanine risk to grow as the market continues to evolve.”

Francovicchio pointed out that EIF always invests in mezzanine risk in connection with capital relief trades. “This allows the issuer to benefit from a lower weighted average price and for us to collaborate with third parties who participate in the equity tranche,” she said.

Equally, a security type that is likely to expand post-Basel 4 is transactions backed by first-lien mortgages. Wainer anticipates that the introduction of output floors for IRB models under Basel 4 could generate mortgage-related risk transfer transactions in the Nordics and Benelux to mitigate the switch from LGD to LTV – although he indicated this is likely to be issuer- and portfolio-specific.

Kakalia also expects mortgages to become a regular feature of the CRT market in time. “Mortgages are extremely interesting and represent the largest asset class on several European banks’ balance sheets. Under Basel 3.5, mortgages at IRB banks in most Northern European countries will be impacted by the standardised risk weight floor, leading to a material uplift in RWAs. Our expectation is that starting in 2020-2021, banks will be keen to address their RWA uplifts, in order to maintain capital ratios and ROE.”

In the meantime, he suggested that market participants need to adapt to the features of mortgages, which are significantly longer-dated than typical CRT assets like corporate and SME loans. “Most asset managers raise funds with capital committed for 5-8 years. Consequently, transactions may need to focus on more seasoned or shorter-dated portfolios, or a more active secondary market needs to develop, allowing investors to exit the risk prior to a transaction’s maturity,” he explained.

Overall, SRT diversity is expected to grow to mirror bank origination channels and balance sheets. Pascale Olivié, deputy head of structuring, finance department at Credit Agricole CIB, confirmed that her firm also uses synthetic securitisations to distribute risk and complement its cash distribution - which is expected to be more constrained under IFRS 9.

“Synthetic securitisation contributes to push further our originate-to-distribute model. It enables us to support business development with new origination and improves our balance sheet management,” she observed.

Matthias Korn, head of financial solutions at Caplantic, anticipates that a new generation of capital relief trades will emerge with banks requiring relief from IFRS 9 and the reduction of lifetime expected loss. “What is the reason behind bringing a deal? If it is to increase core capital, synthetic securitisation is the only answer for banks without capital market access, like public or cooperative banks. But if it is to increase RWA profitability or manage a portfolio effectively, securitisation is also an interesting solution,” he observed.

Kakalia added that regulators in other jurisdictions - including in North America, Eastern Europe and Asia - are becoming more open to risk-sharing transactions. “They recognise that the technology can be employed to address capital and balance sheet management goals,” he agreed.

Looking ahead, it seems likely that the UK is heading towards a hard Brexit, which Wainer indicated may be unhelpful for CRT players and assets. “Hard Brexit is likely to impact pricing and may even result in some downgrades,” he observed. “The UK Treasury has allowed for transitional arrangements, which is helpful, as the market needs certainty. But these alone will not be sufficient, if not reciprocated by the EU.”

He continued: “The UK PRA has in the past shown the ability and willingness to go it alone, so the CRT market is likely to see some divergence over time. However, there is no reason for documentation to not continue to be governed by English law.”

Finally, regarding the turn of the credit cycle, ArrowMark is attempting to mitigate any market downturn by applying more conservative assumptions during the evaluation of underlying collateral and incorporating additional structural protections. “We’re incorporating more punitive base-case loss assumptions and enhancing security structures to match our forward expectations. In any case, we employ a partnership approach to our SRT investments and work with issuers to ensure transactions meet their objectives, as well as those of our investors,” Abrell concluded.

Corinne Smith

Structured Finance

Market moves update

Company hires and sector developments in structured finance

Accrual clause nixed

The New York State Court of Appeals last week held that contractual attempts to extend the statute of limitations for causes of action involving breaches of contract are unenforceable because they violate New York law and public policy. In the case at issue, the plaintiff (Deutsche Bank National Trust Company) argued that the accrual clause in Harborview Mortgage Loan Trust 2007-7 created a substantive condition precedent and that the accrual clause expressed the parties’ clear intent to delay accrual of a breach of contract cause of action until the specified events had occurred. As trustee of the RMBS, it brought suit to enforce representations and warranties that were made by the defendant (Quicken Loans). A recent Cadwalader memo suggests that the fact that the Appeals Court disagreed with both arguments means that existing contracts that provide that cure or repurchase are the sole remedies for a breach of reps and warranties are unlikely to support an argument that a cause of action for breach accrued at any time after the making of the related contract. Additionally, accrual clauses, as currently drafted in typical agreements, that purport to delay the accrual of causes of action need to be carefully evaluated in future transactions and redrafted to address the shortcomings identified by the court.

FinHub launched

The US SEC has launched a Strategic Hub for Innovation and Financial Technology (FinHub), which will serve as a resource for public engagement on its fintech-related initiatives, such as distributed ledger technology, digital marketplace financing and artificial intelligence/machine learning. The FinHub replaces and builds on the work of several internal working groups at the SEC that have focused on similar issues. The portal will be led by Valerie Szczepanik, senior advisor for digital assets and innovation and associate director in the SEC's Division of Corporation Finance, and staffed by representatives from the Commission's divisions and offices who have expertise and involvement in fintech-related issues. 

UK

Tunstall Real Estate Asset Management has hired David White as head of debt strategies, tasked with developing the Tunstall business and increasing the loan book by £150m. White joins from CR Management where he was md, responsible for UK debt business.

Structured Finance

Market moves update

Company hires and sector developments in structured finance

[b]Acquisition[/b]

[b]Miller[/b] is to acquire the independent London market (re)insurance broker[i], Alston Gayler and Co[/i], currently majority owned by Nelson Holdings Limited. The transaction will bolster Miller’s offering to clients and strengthen its position as a leading London wholesale and specialist broking platform. The transaction is subject to regulatory approval and financial terms were not disclosed.

[b]UK[/b]

[b]MUFG[/b] has hired [i]Ramnik Ahuja[/i] as director of structured solutions business. Before joining MUFG, Ahuja was a director in the banking treasury practice within the banking and capital markets audit practice at Deloitte UK.

[b]US[/b]

[b]Morningstar[/b] has hired [i]Kurt Pollem[/i] as head of CMBS ratings and analytics in New York. In his new role, Pollem will be responsible for leading Morningstar’s CMBS and other CRE ratings initiatives. Pollem will report to Brian Grow, president of Morningstar Credit Ratings. Most recently, Pollem served as md of Hannon Armstrong Sustainable Real Estate, securitising C-PACE loans.

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Structured Finance

Market moves update

Sector developments and company hires in structured finance

China

Fitch Ratings has launched Fitch Bohua Credit Ratings to serve China's onshore bond market and has appointed Danny Chen as Fitch Bohua's ceo. Initially, the company will cover banks, non-bank financial institutions and insurers, as well as the structured finance sector. Chen was previously ceo of Qingdao Conson Financial Holdings. A team of analysts, business development and support staff are already in place at Fitch Bohua and the company expects to fill other positions soon.

Global ceo appointed

GLAS has promoted Steven Hodgetts to ceo, from his previous role of head of EMEA at the firm. He takes over from co-founder Mia Drennan, who becomes group president of the global business in a newly created role, while Joanne Brooks takes up the role of head of EMEA.

ILS

Amundi Pioneer has hired Campbell Brown as an ILS portfolio manager, based in Boston. Before joining the firm, Brown worked as an underwriter and vp at Odyssey Re.

Restructuring team formed

Akin Gump has formed a four-partner financial restructuring and global debt finance team. The team includes Thomas O’Connor, Renée Dailey, Christopher Lawrence and Chester Fisher, all joining from Morgan Lewis. O’Connor will reside in Akin Gump’s London office, while Dailey, Fisher and Lawrence will launch the firm’s new Hartford, Connecticut office. The team focusses on the institutional debt private placement market across the globe, with a practice encompassing a wide range of private placement financing transactions and financial restructuring matters.

US

Crescent Capital has hired Mark du Four as md, focusing on private capital markets. Du Four will be responsible for sourcing middle market lending opportunities for the Crescent platform and providing capital markets and syndication capabilities. Previously, du Four was head of capital markets for NewStar Financial, where he worked for 14 years.

Penn Mutual Asset Management has hired Chris Fanelli as md in business development and will drive the firm’s institutional sales efforts for its fixed income strategies. Fanelli previously held a position as md at Guggenheim Partners.

Structured Finance

Market moves update

Sector developments and company hires in structured finance

Moody's has downgraded the ratings of  123 tranches, placed on review for upgrade two tranches and affirmed 34 tranches in  84 Italian RMBS auto ABS, consumer loan ABS and consumer CDQ ABS deals . The rating actions were prompted by the rating agency's lowering of Italy's local-currency bond ceiling to Aa3 from Aa2. This which follows the downgrade of the government of Italy's bond rating to Baa3 with stable outlook from Baa2 under review for downgrade. As a result, the Italian structured finance ratings are now capped at Italy's local currency bond ceiling of Aa3.

Royal Bank of Canada has hired three new members to its European real estate team, which  Charlie Foster as md and head of real estate,  Andrew Penny as senior advisor and Julian Livingston-Booth  as equity analyst. Foster and Penny both join from Canaccord Genuity while Livingston-Booth was previously at Goldman Sachs as an equity research analyst.

 AXA Investment Managers  and NIBC Bank have further strengthened their partnership with the offering of Dutch mortgage loans with broader features, including a long fixed interest rate period, a product that has seen higher demand from borrowers. Through this partnership, AXA IM also invests on behalf of large institutional investors in selected Dutch mortgage loans originated by NIBC based on criteria agreed in advance between AXA IM and NIBC.