Contents

ABS

Slow start

European ABS and CLO market update

The European ABS market is experiencing its “slowest start to a year since 2011” as STS and Brexit uncertainty dampen primary activity. Attention is being focused on secondary trading and CLO issuance.

“CLOs have started the year fairly well,” says one portfolio manager. “The latest St Paul’s CLO has just been announced, and there are a few more already in the pipeline already.”

SCI’s deal pipeline lists five European CLOs apart from St Paul’s, but only one ABS and one ILS. Those deals are €300m Alhambra SME Funding 2018-1 and €90m Atmos Re.

“Away from CLOs there is a first mover disadvantage in taking a view on the regs. There is still huge uncertainty about STS compliance and that is spooking would-be issuers,” says the portfolio manager.

He continues: “Then you have issuers who have the data and are comfortable with compliance, but who cannot find buyers. The banks are skittish and that means issuers do not have certainty that they can place a transaction.”

The portfolio manager notes that the length of time it is taking to finalise the securitisation regulations has surprised even the regulators themselves. Brexit has been an unwelcome distraction, in that regard.

“STS got through the European Parliament in late 2017, but from what I have heard, ESMA completely underestimated this. There has been an awful lot of back and forth with the lawyers and then, on top of that, everyone has been told to drop anything non-Brexit related,” he says.

He continues: “Brexit is obviously the elephant in the room. If it is a hard Brexit and you get TFS 2 in the UK then there will be no prime issuance from London and we might get TLTRO 2 in Europe, which will put dampeners on European issuance.”

The portfolio manager reports that he was at a conference recently where the best case scenario for meaningful European issuance was said to be late in this quarter, with the summer’s Barcelona conference seen as a mid-case. If issuance has not picked up by then, European elections will shut activity down and the market will be on hold until around October.

“The outlook right now is completely uncertain. We are dealing with politics here, but the early signs are that this could be a very slow year. Even the best case scenario is that things will be very quiet until the end of Q1 or start of Q2,” says the portfolio manager.

James Linacre

Structured Finance

Pepper up

European ABS market update

European secondary market activity is picking up, following a quiet start to the year. However, the new issue pipeline remains sparse, with only four CLO managers lining up deals.

“We’re not hearing of anything imminent,” confirms one portfolio manager. “There is talk of a UK master trust issuer potentially tapping the market – it already delivers to the Bank of England and so has 90% of the systems in place for the new regulations. Otherwise, Pepper is expected to bring a non-conforming RMBS in a few weeks, including short-dated US dollar- and euro-denominated tranches.”

The portfolio manager adds that Macquarie’s refinancing of its Puma 2014-1 last week was “interesting”, although he notes that the move failed to provide a clear price point because the paper was placed with the same investors that were called out of the deal. A$244m of two-year class AR notes were sold at one-month BBSW plus 110bp. The original 2.7-year class A notes were placed at one-month BBSW plus 90bp.

Meanwhile, the number of bid-lists hitting the secondary market has increased this week, with “light volumes” seen in high quality CLO and short-dated auto ABS paper. SCI’s BWIC calendar shows that BUMP 9 B was covered at 99.218 yesterday, for example, while BABSE 2014-2X A1R was covered at 99.6.

The portfolio manager adds that a couple of lists comprising mezzanine non-conforming RMBS bonds have also traded well. However, he points out that it remains unclear whether the paper is going to the Street or to end investors.

Finally, regarding Charter Court’s sale of its Precise Mortgage Funding 2018-1B and 2018-2B residuals (SCI 18 January), the portfolio manager speculates that the move could be for regulatory capital purposes or driven by reverse enquiry. “The positions are relatively cheap compared to where they were six months or a year ago. If you like Charter Court and are confident in its business model, why not hold its residuals?” he asks.

Corinne Smith

Structured Finance

SCI Start the Week - 21 January

A review of securitisation activity over the past seven days

Transaction of the week
The European securitisation pipeline remains all but empty as regulatory uncertainty continues to hamper new issuance activity. Upcoming optional redemption dates could provide a much-needed source of supply, however, with the potential restructuring of the Towd Point Mortgage Funding 2016-Granite1, 2 and 3 deals leading the way (SCI 18 January).

Cerberus is currently exploring 'strategic alternatives' with respect to the loans held in these securitisations (SCI passim). Reading between the lines, TwentyFour Asset Management partner and portfolio manager Rob Ford indicates that one such strategic alternative is to refinance the deals - either in the public or private securitisation markets - and potentially involve the same anchor investor.

In 2016 when the deals were originally issued, it was well known that some large Japanese banks (such as Norinchukin) were significant investors in UK RMBS, attracted by the spread levels available at that time - albeit as spreads subsequently tightened, they moved away from RMBS and turned their attention to the CLO market. They are believed to have bought a vast chunk of the £4.63bn senior tranche of Granite1, which was largely pre-placed, and may renew their appetite for the same assets now that spreads have widened back to approximately the same level as when the deal was issued. The pool factor for the senior notes currently stands at 51%, implying that their holding has reduced significantly, due to amortisation.

"A restructuring of the deal would provide access to seasoned loans and another three years of performance history," Ford observes. "For example, 90-plus days arrears have dropped over the last three years and the pool - which was originally sized at £6.2bn - has only seen £13.5m of losses, meaning that the refinancing may qualify for better credit enhancement."

He adds: "Originally, there was 24% credit enhancement at the triple-A level; now it stands at 38%. By taking the credit enhancement back to the mid-20s, the cost of the refinanced transaction will be cheaper for Cerberus, especially since the credit yield curve is flatter than in early 2016."

Another strategic alternative for the Towd Point deals could be to swap them into US dollar-denominated issuances, following the example of the Nationwide and Santander RMBS and Barclays credit card master trusts, which all issued short-dated dollar notes last year (SCI 24 July 2018). "US investors are much less concerned about the short-term Brexit noise and are not subject to the new EU regulation, and the opportunity to buy European triple-A notes that yield similar spreads to US triple-B credit risk transfer notes is attractive. Theoretically, it would be straightforward to put a new US SPV together, transfer all of the Granite assets and sell them plus the swaps - thereby bypassing the European securitisation regulation altogether," Ford suggests.

A third strategic alternative is for Cerberus to establish a structure similar to the Ripon Mortgages and Durham Mortgages transactions (SCI passim). These deals involved the assets being warehoused and the resulting paper retained by a consortium of 'stable funding banks', which proceeded to sell it down at a later date - albeit those banks were providing that funding to a UK government agency, so may be less inclined to do the same for a US private equity house.

Whatever the outcome of the Towd Point consultation, it is expected to have a three- to four-month gestation period.

Other deal-related news

• The assignment by Fitch of a primary manufactured housing (MH) specialty servicing rating of RPS3- to Cascade Financial Services is being seen as a first step towards building a post-crisis MH RMBS market. The move also signals a shift in manufactured housing servicing dynamics (SCI 16 January).
• AlphaCat Managers has securitised a non-standard passenger auto insurance portfolio, arranged by Ledger Capital Markets. This innovative transaction creates new ILS market opportunities in securitizing broader classes of insurance risk. We look forward to working with more MGAs and insurers. The bilateral transaction comprises a private placement of two tranches of notes: a US$6.67m senior note and a US$3.33m junior note, which will pay ILS fund investors retained earnings after payments made to support the senior tranche under a profit-and-loss share agreement (SCI 18 January).
• Charter Mortgages has agreed to sell its residual economic interest in the Precise Mortgage Funding 2018-1B and 2018-2B securitisations to Merrill Lynch International (MLI) for a cash consideration of £6m, payable on completion. The transaction, which is expected to complete on 23 January, will involve the sale of the RC2 residual certificates to the securitisations (SCI 18 January).
• Cerberus has acquired a €2.1bn portfolio of Italian unsecured non-performing loans via online auction platform Debitos. The move is believed to be the largest NPL transaction undertaken in the fintech sector (SCI 17 January).
• The standstill in connection with the GB Mozart loan, securitised in the TMAN 7 CMBS, has been further extended to 31 March. The aim is to facilitate the liquidation of the portfolio. For more on CMBS restructurings, see SCI's CMBS loan events database.

Regulatory round-up

• A Japanese Financial Services Agency proposal to introduce a risk retention rule may result in some Japanese investors being disincentivised from purchasing securitisation positions, where an appropriate entity has not committed to hold a 5% retention piece in the transaction. In a recent client memo, Anderson Mori & Tomotsune and Milbank notes that although the rule will apply to global securitisations, given that Japanese investors are estimated to account for 50%-75% of demand for triple-A rated CLO tranches, the proposal could have a dramatic effect on the sector (SCI 16 January).
• The EU Securitisation Regulation came into force as of 1 January this year, despite several parts of the legislation not yet having been finalised and amid concerns that market participants may lack the necessary infrastructure to adequately comply. Despite this, it is thought that there will be more STS-compliant transactions issued at the start of 2019 than expected, with many issuers hoping to attain the STS label at a later date in the absence of official third-party verification agents (SCI 16 January).

Data

Pricings
US new issuance sprang back into life last week, with eight auto and consumer deals pricing. A pair of Australian RMBS - albeit one was a refinancing - also printed.

The auto ABS comprised US$1.5bn CarMax Auto Owner Trust 2019-1, US$254.4m CPS Auto Receivables Trust 2019-A, US$1.03bn Drive Auto Receivables Trust 2019-1 and US$1.25bn Ford Credit Auto Owner Trust 2019-REV1. The consumer ABS were US$476.19m Master Credit Card Trust II Series 2019-1, US$748m Navient Student Loan Trust 2019-1, US$600m OneMain Financial Issuance Trust 2019-1 and US$457.9m SoFi Professional Loan Program 2019-A Trust. Finally, the RMBS consisted of A$328m Puma 2014-1 Trust (refinancing) and A$400m Triton Trust No. 8 Bond Series 2019-1.

BWIC volume

Podcast
SCI's latest podcast is now live. This month the team round up asset class performance from 2018 and look ahead to the expectations for 2019. Access the podcast here, or on Apple Podcasts or Spotify.

Structured Finance

Latest SCI podcast available

SCI podcast episode four is now live

SCI’s latest podcast is now live. This month the team round up asset class performance from 2018 and look ahead to the expectations for 2019.

2018 was a landmark year, with US new issue supply outpacing maturing debt for the first time since 2007. Furthermore, while non-mortgage ABS and structured credit have had positive net issuance since 2014, last year was the first since the financial crisis in which non-agency CMBS and non-agency RMBS outstanding also posted positive net gains.

Hear more about what is driving growth and what the main headwinds will be by accessing the podcast here, or on Apple Podcasts or Spotify.

Structured Finance

Chinese equipment lease ABS prepped

Transaction features several firsts for experienced issuer

Far East Horizon Corporation (FEH) is marketing a CNY1.865bn securitisation backed by equipment lease receivables. The transaction, dubbed Far East Leasing 2019-1, is the first deal from FEH to be supported by smaller-ticket and more diversified finance lease contracts as well as being the first that S&P has rated.

S&P has assigned preliminary ratings on the transaction of single A on the CNY600m class A1 notes, single A on the CNY300m class A2 notes, single B on the CNY860m class B notes, while the CNY105m subordinated tranche is not rated. The underlying collateral was originated by the Far East Horizon Group under the names of its subsidiaries, International Far Eastern Leasing Co and Far East Horizon (Tianjin) Financial Leasing Co which also act as servicers, while the notes are to be issued by China Resources SZITIC Trust as trustee of Far East Leasing 2019-1.

The trust is established as a special-purpose-trust (SPT) under China’s Trust Law and the transaction structure and terms, which are consistent with the governance of China's asset-backed notes (ABN) securitisation scheme, are managed by China's National Association of Financial Markets Institutional Investors (NAFMII).

The transaction consists of a number of unique features, such as the securitised financial lease receivables being associated with two general business groups of the originator group, the consumer and retail business and machinery business, with lessees from over 20 industries. The transaction also includes a commitment from the originator to make whole the stated notes payments to class A1, class A2 and class B notes in case of shortfall from the SPT distributions.

The transaction includes separate waterfalls for the income and principal collections with the typical arrangement of principal draw on the shortfall of interest collections. As a result, the income collections could be used to pay down notes principal if there is accumulated uncovered principal loss from the assets.

S&P notes that a potential weakness in the deal is the relatively concentrated nature of the securitised receivables pool with fewer than 400 obligors, with the largest obligor in the pool representing slightly more than 1% of the lease receivables. The rating agency notes that with such an asset profile, the forecasting ability of the historical performance data could reduce and, should the macro or industry environment turn negative, there could be grouped or correlated defaults of the obligors resulting in higher pool loss.

Furthermore, while securitisation has developed quickly in China in recent years, there is a lack of experience in servicing transition in China’s securitisation market. Additionally there are few transactions to date that have experienced the critical stress of a failure of important counterparties, like the servicer.

Fitch has commented that the Chinese ABS sector should be supported by the country’s crackdown on consumer credit in the shadow-banking sector and tighter regulations on non-bank lenders. The agency notes however that the short term impact of this is a slight-deterioration in performance of existing consumer ABS asset pools and a drop in issuance.

Non-bank consumer loans doubled between the year-end 2015 to the year-end 2018, standing at around CNY3trn, or 6% of all household debt, although this growth was mainly prior to regulatory tightening toward the end of 2017. Peer to peer lending, for example, has fallen sharply last year from CNY1trn at the end of 2017 to CNY750bn at the end of last year, largely as a result of the closer scrutiny placed on web-based micro-lenders.

Furthermore, the regulators introduced higher capital requirements on micro-originators which will possibly reduce the risk that severe stress at a servicer could compromise servicing quality or disrupt collections. Overall, the regulations should improve the quality of future ABS pools, such as a strict implementation of an APR cap of 36% for cash loans, which could result in fewer high-risk borrowers being originated.

Fitch adds that there has also been a drop of 30% in unsecured consumer credit ABS issuance as a result of the regulations, from 162 deals in 2017 to 113 in 2018. However, the rating agency comments that it expects non-bank consumer credit to return to growth in 2019 as demand for online consumer loans remains strong and the government aims for non-banks to support its efforts to promote inclusive finance to the under-banked population.

More broadly the rating agency says that structured finance in the Asia-Pacific region has shown strong performance, with more than 91% of ratings outstanding at the beginning of 2017 being either affirmed or paid in full during the year as healthy regional economies have allowed obligors to service their debts. The agency says it has stable outlooks on all Asia-Pacific structured finance asset classes and on most individual tranches, with the only exception being one Chinese ABS with a positive outlook and one structured credit rating with a negative outlook.

Richard Budden

Capital Relief Trades

Risk transfer round-up - 25 January

CRT sector developments and deal news

Deutsche Bank issued a leveraged loan capital relief trade in December among a flurry of risk transfer transactions (SCI 21 December 2018). Dubbed LOFT 2018-1, the US$240m 10-year CLN was priced at 13.25%. According to SCI data, it is the widest print of the year.

The deal is non-callable and features an eight-year weighed average life. The leveraged finance transaction follows another leveraged loan CRT that was completed by Bank of Montreal in September 2018. The deal, called Manitoulin, was priced at Libor plus 12.25% (see SCI’s capital relief trades database).

Capital Relief Trades

Minerva closed

Innovative guarantee completed

Banca Nazionale Del Lavoro has closed a €100m mezzanine guarantee with the EIF. Dubbed Minerva, the transaction was completed with funds from the European Fund for Strategic Investments (EFSI) and is expected to release €600m for lending to Italian SMEs. The guarantee is the first SRT transaction that the EIB Group has executed for Italian corporate loans and includes novel features, such as pro-rata amortisation and excess spread.

According to Giovanni Inglisa, structured finance manager at the EIF: “We made use of excess spread because it makes the transaction more efficient for the originator, as it enables us to optimise the size of the mezzanine tranche. This makes the released cost of capital very competitive, which in turn is expected to improve the cost of funding for new SME lending.”

The excess spread features were structured in accordance with proposals in the EBA’s SRT discussion paper. According to the paper, excess spread should be structured as a trapped mechanism and be commensurate with the expected loss of the portfolio, so that the ledger that is built up over time is not disproportionately large compared to the expected losses (SCI 22 June 2018).

Similarly, pro-rata amortisation renders the transaction more capital-efficient, since the relative size of the tranches remains stable over time. Sequential amortisation frees up less capital as the relative size of the tranches varies over time, in particular for the first loss tranche, which becomes disproportionately larger. A further novel feature is a replenishment mechanism.   

According to the terms of the transaction, the EIB provides a back-to-back guarantee to the EIF and the weighted average life of the portfolio is approximately two years, which is in line with past EIF synthetic trades. The short life of the portfolio renders a replacement deal in the short-term a more likely scenario.

The transaction follows EIF’s corporate SRT with BBVA in December (SCI 11 January). EIF deals typically reference SME loans rather than corporates. Looking ahead, the EIB Group is looking for similar opportunities in the Italian market this year.

Stelios Papadopoulos

CLOs

CLO arbitrage remains challenging

Octagon reset in focus

The currently marketing Octagon 21 reset highlights challenges in the CLO arbitrage.

One trader says they will be participating in the deal, higher up the capital stack. “The manager is issuing the reset to try to improve the transaction which has become quite challenged, with some defaults and troubled credits."

The trader adds that the manager has tried to improve the deal further by issuing more equity. Despite this, the trader notes that the deal “could continue to see more headwinds, with a number of macro challenges in the year and the potential for greater defaults.”

Furthermore, CLO arbitrage has become a significant challenge for issuers in both the US and Europe. Despite issuance dynamics being "better" in Europe, a trader says that relative value is still with US CLOs.

The trader adds that while arbitrage has become an issue in both jurisdictions, it is posing “significant” challenges in the US. The difficulty in arbitrage, the trader says, is to find a buyer “to take a hit on the equity” and that, as such, “the arbitrage still works in Europe”.

The CLO market in Europe is, however, limited by its smaller size compared to the US and faces several challenges on the horizon, such as “Brexit, a downturn in the manufacturing index and upcoming elections.” 

Richard Budden

CDS

CDS index-linked ETF launched

Fund will target gap in passive fixed income space

Tabula has launched a new fixed income ETF tracking the iTraxx European Crossover five year index. The fund follows hot on the heels of similar offerings from the firm, as it seeks to maximise on escalating inflows into CDS indices as well as the dearth of such products aimed at passive fixed income investors.

Michael John Lytle, ceo of Tabula, says that the vast majority of ETFs track equity exposure across various asset classes, with 20-30% of equity assets managed passively, while in fixed income this falls to under 5%. Additionally, many investors combine a range of fixed income factors into one investment, with both interest rate exposure and credit exposure.

“If you look at the state of ETFs today,” continues Lytle, “there are not many funds offering investors the ability to segment individual factors. Tabula’s first funds utilise CDS to offer credit exposure with a minimal amount of interest rate exposure.”

Furthermore, Lytle explains that trading single name CDS can result in a bid/offer spread similar to individual cash. With a CDX index, however, that tracks 75-plus equally weighted names, the resulting liquidity is generally significantly higher and bid/offer spreads are much lower.

As a result, Tabula’s new fund - which launched in December - provides exposure to high yield European corporate credit by investing in the iTraxx Crossover five-year index, rather than a basket of individual corporate bonds. Lytle adds that, “…The fund also benefits from the high degree of liquidity in the index, which sees US$1.8bn traded on the average day. This means that you can do a large amount of trading without impacting market prices or spreads.” 

There are also further benefits to trading CDS indices through an ETF, such as the lower barrier to entry that many investors face when looking to trade CDS products, exemplified by Lytle’s estimate that only around 250 European investors regularly trade CDS. Part of this is due to the onerous requirements involved before firms can trade CDS, such as the signing of ISDAs with several counterparties as well as a large number of operational and administrative changes to company infrastructure.

“With an ETF” Lytle comments, “you buy shares in the fund, receive a daily net asset value and then sell the shares at some point in the future. The barriers to entry are much lower, but the exposure achieved is the same.”

Investing in CDS indices does also have its difficulties, such as managing the roll every six months when a new on-the-run-index is launched. However, Lytle explains that the credit curve tends to be positively sloped and that selling the shorter maturity position in the off-the-run index, and buying the longer maturity index, can create value.

He adds: “The off-the-run is 6 months closer to maturity and, all things equal, should be trading at a tighter spread - and therefore worth more - than where you bought it.  If you execute the roll correctly, you can capture value that is not generally accessible in the cash bond markets.”

Another issue with CDS indices, including iTraxx Crossover, is that evidence has emerged recently of significant basis risk relative to corporate bonds, making them inefficient hedges (SCI 23 May 2018), particularly in periods of recent volatility. Lytle doesn’t disagree, but adds that, with iTraxx, you get “pure credit exposure and high liquidity, which is difficult to create through any other trading position.”

He adds: “…It is worth noting that there is a basis between cash bonds and CDS. This means that the spread on CDS, and on a fixed-rate bond from the same issuer that has been interest rate hedged, is not necessarily the same. There are some technical reasons for the difference. When trading individual names this can be an issue.”

“However,” Lytle continues, “once you have 75 names there are offsetting movements in the basis on different names.  If you wanted to recreate the cash spread by buying hundreds of cash bonds and hedging the interest rate risk, you would introduce other sources of slippage and the underlying assets would be much less liquid.”  

In terms of where Tabula is positioning their business, Lytle says he does not wish to go head-to-head with large providers, like Blackrock. Instead, he wants to offer different exposures, like credit factor products, that are complimentary to the handful of products that have been successful to date.

With regard to the jurisdictions targeted, the firm has “passported” its funds to the UK, Nordics and German and French speaking countries, with all investors being institutional such as insurers, pension funds, asset managers, wealth managers and family offices. A large percentage of the client base will likely be asset managers controlling a lot of fixed income money, but which don’t have access to the type of products Tabula offers.

Looking ahead, Lytle is confident in the growing wave of interest in index-linked products and says that says that “generally” he sees an “escalation of broader flows into CDS indexes like iTraxx Main and Crossover and ETF investors deserve to have access to these exposures.

“Of course though,” he concludes, “we have plans for a much broader range of fixed income exposure and this is just the beginning.  We urge passive investors to watch this space.”

Richard Budden

Structured Finance

Two depart at ILS firm

Sector developments and company hires

Europe

M&G Investments has appointed Vincent Charles-Gervais as portfolio manager within its ABS division. Charles-Gervais will report to James King, head of ABS portfolio management, and will be based in London. Charles-Gervais has 15 years’ experience in structured and alternative credit and joins from ICG where he was a portfolio manager for ICG alternative credit. Prior to that he held research and structuring roles at Zais Group, Lehman Brothers and AXA IM.

ILS

Markel CATCo ceo Anthony Belisle and ceo - Bermuda Alissa Fredricks are no longer with the company, after Markel policy violations relating to an undisclosed personal relationship were discovered during an internal review prompted by governmental inquiries into loss reserves recorded in late 2017/early 2018. The internal review continues, with no conclusions reached so far. However, management and oversight of Markel CATCo will be provided by Jed Rhoads (president and chief underwriting officer, Markel Global Reinsurance) and Andrew Barnard (senior md, head of international property catastrophe and retro reinsurance at Markel Global Reinsurance), while the search for a new ceo is underway.

US

Mayer Brown has hired Matthew Kluchenek as partner, based in the firm’s Chicago office. He specialises in derivatives work, including enforcement and regulatory matters. He was previously a partner at Baker McKenzie, heading up the firm’s global derivatives and hedge fund practice areas.

Structured Finance

Alt investor boosts global presence

Sector developments and company hires

Europe

Palamon has hired Aqib Kadar as director of tax and structured finance. Kadar was previously at PwC where he was a director in M&A tax.

Global

Värde Partners has appointed Elena Lieskovska and Haseeb Malik to partner, and promoted Brad Bauer to deputy cio. Based in London and Singapore respectively, Lieskovska is head of European financial services and Malik is head of Asia corporate and traded credit. In addition to his role as deputy cio, Bauer is a partner and global head of private debt, transportation and energy. He will relocate from Minneapolis to London in the coming months.

ILS

GC Securities has named Brendon Roche svp, based in Dublin. He was previously global leader of the Marsh Captive Solutions Centre of Excellence for ILS and SPV management services.

US

Sheppard, Mullin, Richter & Hampton has recruited partner Elizabeth Frohlich to its business trial practice group in San Francisco. She was most recently a partner at Morgan Lewis and represents banks and securities broker-dealers in complex civil and criminal actions in federal and state courts and arbitrations, and is particularly experienced with securitisation litigation.

Structured Finance

New ILS unit launched

Sector developments and company hires

ABS outfit launched

US Bancorp has launched a new ABS lending business, providing non-recourse commitments secured by consumer and commercial receivables. Bo Weatherly - who joined the firm in 2016 - will serve as md for the new business, based in Charlotte, North Carolina. He has brought together a team of established industry experts, each with an average of 20 years of experience in the securitisation markets.

Europe

Cairn Capital has appointed Michael Htun as a portfolio manager, responsible for CLO tranche investments. He was previously a vp at NatWest Markets, where he worked in leveraged credit sales and CLO structuring. Prior to this, he ran the secondary European CLO trading business at RBC and has also worked at Halcyon Asset Management, Bank of America and Fitch.

ILS unit launched

PIMCO has launched its property and casualty insurance-linked securities business, following the appointment of Rick Pagnani, evp, to lead it (SCI 11 January). The firm says it will work in partnership with its parent, Allianz, to source global catastrophe risk in the form of collateralised reinsurance and other structured investments, while maintaining independent underwriting and portfolio construction procedures. Together with Allianz Re, Allianz Group’s corporate insurance carrier Allianz Global Corporate & Specialty will support the PIMCO ILS business through access to its international underwriting network and the deal structuring capabilities of its capital solutions team. Pagnani, who has more than 30 years of experience in the ILS market, will lead a group of dedicated professionals and incorporate robust underwriting and risk management tools for the business. He will report to Nic Johnson, md and portfolio manager. 

Issuer name changes

The Symphony CLO III and Symphony CLO XI transactions have changed their names to California Street CLO III and California Street CLO XI.

RMBS upgrade

Moody’s has upgraded two tranches of Together’s debut RMBS, Together Asset Backed Securitisation 1 and affirmed its ratings on the rest – the rating agency has upgraded the class B notes from Aa2 to Aa1 and the class C notes from A2 to A1. This is a result of increased credit enhancement, following the addition of a sequential and non-amortising additional reserve fund by Together in November last year.