News Analysis
ABS
Private market thriving
Specialty finance firms find multiple benefits in private deals
Private securitisations are thriving, particularly among specialty finance companies, as a flexible and economic funding option. Equally, many insurers are turning to the private market to securitise equity release mortgages, finding it the most cost-effective way to free up capital.
According to Anton Krawchenko, associate partner, capital and debt advisory at EY, says private securitisations largely come in two forms - bank funded or private placements. The first involves banks, or credit funds, funding a loan through securitisation - on or off balance sheet to the sponsor - and may look like a securitisation in many ways, albeit they can be in loan format.
Generally, notes Krawchenko, private deals are around £100m in size as public deals don’t make economic sense for less than £250m and bank funded securitisations are a good option for firms with a track record of solid performance. He suggests, too, that it also helps where “the funder is a relationship bank, as they [have] a broader interest in banking the company, not just executing a single transaction.”
Ashurst notes in a report, that there is growing demand among specialty finance providers to utilise securitisation as a funding method but they do not necessarily want to engage with the complexity and costs involved in a public deal. Furthermore, private securitisation provides flexibility, where originators can upsize or downsize funding subject to market conditions or other factors, while public deals will often require mandatory redemption of funding as the securitised assets pay down, or according to an agreed repayment schedule.
In terms of the key features of private securitisations, Ashurst says that they are typically unrated, although the originator or servicer is able to make rating agency standard data available to facilitate a rating in future and to encourage investors to participate in future. They are also typically unlisted - although are capable of listing – are usually preplaced and structured with certain investors and counterparties engaged from the start to enable mutually agreeable terms and minimise costly execution risk.
Private securitisations are also typically revolving, in that the revenue generated by specialty finance assets that repay during a pre-determined period may be used to finance the origination of, or purchase of, new assets. Finally, Ashurst says that private deals are often backed by specialty finance assets where no developed securitisation market yet exists and therefore no established set of criteria to follow – private deals allow for a more negotiated and bespoke format which meets originator and investor needs.
Krawchenko agrees that that companies can find working directly with a lender on a private unrated deal provides them with a lot of flexibility to craft covenants and mechanics that work for the company. He notes, however, that while public markets can be inflexible, they are deeper and cheaper than private markets.
Additionally, he comments: “For weaker companies, securitisation funding will normally be the cheapest available. For strong investment grade companies, securitisation funding may not be cheaper (in the current environment), but treasurers get funding diversification and it’s a great working capital funding solution.”
Krawchenko says that a good example of bank funded securitisations are private handset securitisations, which have become an established form of funding for mobile firms throughout Europe. He adds that they tend to be relatively small in size, starting at around €100m but that they can scale up and have the potential to go public in the long run.
The other half of the private securitisation sector, according to Krawchenko, is the private placement market whereby firms work directly with investors such as asset managers, hedge funds, pension funds and insurers. This sees a lot of activity, he adds, because yields are so low in public markets.
As such, investors have only two ways to get yield - either invest in weaker credits, or invest in structured and illiquid debt. In this space, insurers have been particularly active in securitising equity release mortgages that they have acquired or originated, with the portfolio often securitised internally as a means of freeing up capital.
Krawchenko adds: ““By doing a private securitisation [insurers] can produce a high investment grade note which, with the right regulatory features, optimises capital to boost insurer returns, despite the costs and time involved in a securitisation.”
In addition to insurers, trade receivables firms are highly active and in fact, Krawchenko says, his firm is “working on a US$1bn (multicurrency) off balance sheet trade receivables deal for a European corporate, funded by a European bank. Strictly speaking it is a receivables purchase deal (senior lending backed by credit insurance). We find that banks’ approaches to even receivables purchase financings runs the full gamut from simplistic and totally insurance-backed, to complex with all the usual securitisation technology.”
He comments that trade receivables securitisation funding is still an important area for banks. For a full-blown securitisation, deal sizes typically start at £100m but can go close to £1bn with a single lender, particularly where there is strong credit appetite for the corporate, he notes.
Krawchenko says that certain criteria need to be met for firms to look at issuing a private securitisation. First, he says they would need a granular portfolio of assets, second, they need a performance track record and third, the IT infrastructure and staff to support a securitisation and its reporting requirements.
Should those elements be in place, securitisation can make sense. He concludes: “At the moment, for a non-investment grade company private securitisations are the cheapest source of funding. As you move up the credit curve, it may not be the cheapest, but you get diversification of funding, you speed up funding of working capital, and you can also obtain off balance sheet accounting treatment.”
Richard Budden
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News Analysis
Structured Finance
Counterintuitive results
EBA consultation incentivises unfunded SRT format
The EBA’s consultation on the determination of the weighted average maturity of a securitisation tranche (SCI 2 August) is seen as a positive step for synthetic securitisations, since it takes into account the conditional payments of the underlying assets. However, by not recognising the effect of prepayments and pool amortisations, the proposal creates counterintuitive results that incentivise banks to opt for unfunded significant risk transfer deals over funded ones - even though regulators have long disclosed their preference for the latter.
The revised CRR for securitisation has introduced tranche maturity as an additional parameter in the formulae that are used to calculate the risk weights of securitisation positions. According to Article 257 of the CRR, banks can use either the weighted average maturity (WAM) of the contractual payments due under the tranche or the legal final maturity of the tranche. In both cases, the tranche maturity is subject to a floor of one year and a cap of five years.
The weighted average maturity of a tranche is relevant for banks using the SEC-IRBA or the SEC-ERBA approach and, overall, it’s a more favourable measure for capital relief trade issuers than the legal final maturity. Under the legal final maturity approach, the life of a tranche is linked to its legal final maturity. This is problematic for EU securitisations where the legal final maturity is typically set several years after the maturity of the last loan in the pool, so as to ensure that SPVs have rights to any late-coming recoveries.
The EBA’s consultation states that the WAM of a securitisation position will be calculated by taking into account the contractual premium payments of a CDS and the proposals deviate from Basel in the sense that banks can calculate WAM based on the conditional payments of the underlying assets. This is a desirable outcome from the market’s perspective, given that the performance of most securitisations is asset dependent. Furthermore, the consultation doesn’t mandate any competent authority approval for WAM models.
According to Steve Gandy, md and head of private debt mobilisation, notes and structuring at Santander Corporate and Investment Banking: “We’ve come a long way in terms of the initial EC proposals, which hewed closely to the Basel 4 proposals. However, it is disappointing that the proposal doesn’t recognise the effect of prepayments and reference pool amortisations.”
He continues: “Depending on the deal, this could lead to counterintuitive results. For example, it would appear that unfunded synthetic deals that take into account premium payments but not principal payments would benefit from shorter maturities and hence lower risk weights for the securitisation position, even though the risk of the position is identical to a funded synthetic structure for the same deal. We will be pointing out this anomaly to the EBA.”
Consequently, the consultation favours unfunded guarantees rather than funded options - even though regulators prefer the latter to the former, since funded deals do not expose originators to counterparty risk. Equally, the consultation artificially produces longer weighted average maturities for funded deals, even if the portfolios are exactly the same.
The issues around prepayments stem from the strict assumptions of the asset model, which allows banks to work out the cashflows that derive from a securitisation’s underlying portfolio and the associated bond payments. Jo Goulbourne Ranero, consultant at Allen and Overy, notes: “The model makes some strict assumptions - such as zero recognition of future prepayments, future defaults and delinquencies, except NPLs where no income flows are recognised - so there’s no room for more sophisticated SEC-IRBA modelling. Further issues are reflected in the liability model or more simply the noteholder payments, since they completely ignore optional contractual payments, such as time calls.”
Further challenges of the model extend to the existence of reliable data. In particular, originators or investors who don’t have access to some of the model parameters - such as PD, RR and recovery lag - in a reliable manner may have to deal with some restrictions in the calculation of the WAM. Pablo Gonzalez Sanchez, structured finance manager at the EIF, states: “If, for example, the base-case PD, RR and recovery lag for a similar portfolio and for a reasonable time horizon aren’t available, then the model will - generally speaking - produce a longer WAM for the relevant tranche.”
He adds: “We assume that any bank, independently of their sophistication, would have access and full comprehension of the specificities of their own loans when acting as originator, so the specific features should be taken into account when running the asset-based cashflow. Investors may not have all the specific features of the interest payments and amortisation of the loans and, if this is the case, the WAM should be calculated using more standard amortisation profiles that may reduce the benefit of the calculation.”
The second set of issues concerns the calculation of the retained senior tranches of securitisations. Ranero explains: “Basing the deemed maturity of retained senior tranches on the premiums that are paid for the more junior tranches leads to counterintuitive results. The deemed maturity of retained senior tranches under the proposal will be - all other things being equal - greater in the presence of sequential amortisation than in the presence of pro rata amortisation because the premium on the junior tranches will be higher for longer.”
The counterintuitive nature of the proposal derives from the fact that the retained senior tranche is expected to be redeemed earlier in the presence of sequential amortisation.
Looking ahead, market sources expect the industry to press the EBA to reconsider these issues.
Stelios Papadopoulos
News
ABS
Debut consumer securitisation prepped
Australian non-bank markets inaugural ABS
Wingate Consumer Finance is marketing an inaugural term securitisation of personal loans extended to borrowers in Australia. Dubbed NOW Trust 2019-1, the A$200m transaction is backed entirely by receivables originated by Wingate Consumer Finance, an established non-bank lender in the Australian personal loan market.
Moody’s has provisionally rated the transaction as Aaa on the A$143m class A notes, Aa2 on the A$16.6m class Bs, A2 on the A$12.8m class Cs, Baa2 on the A$5.2m class Ds, Ba2 on the $13.8m class Es and B2 on the A$4.6m class F notes. There are also A$4m unrated class G notes.
The rating agency notes that NOW Finance is a trademark of WCF, a private company 58.6% owned by the Wingate Group. WCF has been originating personal loans since 2013 and has settled in excess of A$470m of new loans to around 22,500 customers.
In terms of this transaction, it is backed by 10,595 fully amortising, unsecured or secured loans with weighted-average interest of 14.7% and maximum interest rates of 19.95%.The portfolio is highly granular with the ten largest obligors accounting for 0.25% of the total balance and the obligors are also geographically diversified across Australia and 74.1% of the borrowers have a good or above credit rating from Equifax.
Credit strengths of the transaction include excess spread generated by the trust’s expense and income structure and a relatively well seasoned portfolio, with weighted average seasoning of 15 months at closing. Finally, obligor diversification is a credit strength with the largest single obligor concentration limited to 0.03% of the portfolio balance.
There are, however, a number of challenges facing the transaction according to Moody’s, including limited historical data given the firm began originating personal loans in 2013. There is also the potential for over or under hedging risk because the notional amount in the swap agreement is based on the prepayment profile of the note assuming a prepayment rate of 17% on the underlying receivables.
Additionally, the pro rata amortisation of all rated notes will lead to reduced credit enhancement of the seniors in absolute terms, exposing them to the risk of loss in the tail-end of the transaction. Finally, Moody’s notes that WCF is unrated, heightening the risk of a possible disruption in payments and, in the event of a disruption to servicing, there is a risk of disruption to payment receipts from obligors.
Richard Budden
News
Structured Finance
SCI Start the Week - 19 August
A review of securitisation activity over the past seven days
Transaction of the week
CFO backed by PE portfolio (SCI 13 August)
Nassau Alternative Investments is marketing a collateralised fund obligation (CFO) comprising private equity (PE) fund commitments acquired by Nassau Life Insurance Company (NNY). The, largely static, transaction is dubbed Nassau 2019 CFO, and is backed by interests in a diversified pool totalling around US$375.7m in NAV of funded commitments and US$79.3m in unfunded capital commitments.
Fitch comments that the CFO portfolio is the most diversified the agency has rated and comprises 109, mainly US, funds managed by 69 fund managers, with 1,273 underlying investments, spread across strategy, vintage, managers, funds and underlying holdings. The agency adds that the portfolio diversification is counterbalanced by a focus on funds run by smaller and mid-sized managers and a higher allocation to third and fourth-quartile funds relative to other private equity CFO portfolios.
Stories of the week
Brexit impact gauged
UK ABS expected to withstand no-deal
Higher yields?
Bluestone debuts UK RMBS
STS mirage
Still no level playing field despite regulation
Tweaking tradition
Dutch securitisation evolving across established sectors
Other deal-related news
- The Australian Office of Financial Management is inviting tender submissions for the provision of investment management services for the Australian Business Securitisation Fund (ABSF) by 6 September. The AOFM is seeking to appoint an investment manager to assist with the evaluation of investment proposals and provide ongoing portfolio management services (SCI 14 August).
- Banca Monte dei Paschi di Siena has sold a further four non-performing loan portfolios for approximately €340m. The transactions are in addition to those recently finalised with Illimity Bank and Cerberus Capital Management (and brings the total of non-performing exposures sold by the bank since end-July to almost €1.5bn services (SCI 14 August).
- LendInvest has received a £200m investment from National Australia Bank (NAB), in a deal "supported by HM Treasury", the firm says. LendInvest has now raised over £1.8bn of debt and equity from investors services (SCI 14 August).
- GoldenTree Asset Management entity Star Insurance Holdings is set to acquire Syncora Holdings' New York financial guarantee insurance subsidiary Syncora Guarantee (SGI) for US$392.5m in cash, subject to adjustment. The cash purchase price for SGI represents a premium to the closing share price of Syncora's common stock on 1 March 2019, the trading day prior to the announcement of the strategic review process (SCI 15 August).
- Dock Street Capital Management has been appointed replacement collateral manager to House of Europe Funding III. Under the provisions of an amendment to the collateral management agreement, Dock Street agrees to assume all the duties and obligations of the previous collateral manager Hypo Real Estate Bank (SCI 15 August).
- Nord LB completed a landmark €2.6bn shipping non-performing loan deal with Cerberus in April that utilised Houlihan Lokey's proprietary pricing model. The model aids pricing tension and helps keep traditional distressed investors disciplined.(SCI 16 August)
- Crescent Capital BDC is set to acquire Alcentra Capital Corp, a middle-market BDC. The transaction is the result of Alcentra Capital's previously announced review of strategic alternatives led by an independent director committee (SCI 16 August).
- Moody's notes that Barney's bankruptcy filing on 6 August and store closures are credit negative for the two US CMBS Moody's rates with material exposure to the company, DBUBS 2011-LC2 and GSMS 2010-C1, though low loan leverage and the strong locations and demographics surrounding the properties backing the loans help limit these effects (SCI 16 August).
- Roundstone Technologies (RTL) is contending that it has certain rights under a purported sale and purchase agreement in relation to the Business Mortgage Finance 6 securitisation. In particular, RTL purports to have purchased the loans outstanding and all monies standing to the credit of the issuer's bank accounts, and plans to take steps to perfect and transfer the full legal title and/or interest in the collateral security to an unspecified UK affiliate. However, the issuer says such an agreement has been declared by the court to be invalid and that it will, if appropriate, make an application to the high court for urgent relief, including preventing RTL from taking any further action (SCI 16 August).
- KBRA has downgraded the class A1 and class A2 notes of TGIF Funding 2017-1 from triple-B to triple-B minus. The rating agency states that TGI Friday's has been negatively impacted - like other businesses in the restaurant sector - by factors including a shift in consumer preferences and competition from lower-cost alternatives including fast casual dining, quick-serve restaurants, and other food service alternatives (SCI 16 August).
Data
Pricings
Deals that priced last week included:
ABS
American Credit Acceptance Receivables Trust 2019-3; Diamond Resorts Owner Trust 2019-1; Elara HGV Timeshare Issuer 2019-A; Flagship Credit Auto Trust 2019-3; Horizon Funding Trust 2019-1; Master Credit Card Trust II 2019-2; Primrose Funding 2019-1; Santander Drive Auto Receivables Trust 2019-3; Upgrade Receivables Trust 2019-2; World Omni Automobile Lease Securitization Trust 2019-B
CLO
Bain Capital Middle Market CLO 2019-1; Bain Capital Credit 2016-2 (refinancing); Cedar Funding X; Elevation CLO 2013-1 reset ; Guggenheim CLO 2019-1; HPS Loan Management 10-2016 (refinancing); Neuberger Berman Loan Advisers CLO 33; Sound Point CLO XIV (refinancing); Vibrant CLO IV 2016-4 (refinancing)
RMBS
BRAVO Residential Funding 2019-NQM1; New Residential Mortgage Loan Trust 2019-4; NRZ Advance Receivables Trust 2015-ON1 (Series 2019-T2); Ocwen Master Advance Receivables Trust Series 2019-T1; Ocwen Master Advance Receivables Trust Series 2019-T2; STACR 2019-FTR2
BWIC volume
Upcoming SCI event
Capital Relief Trades Seminar, 17 October, London
News
NPLs
Deleveraging boost
Monte dei Paschi completes NPL disposals
Banca Monte dei Paschi di Siena has sold a further four non-performing loan portfolios for approximately €340m (SCI 14 August). The transactions add to the recently finalised deals with Illimity Bank and Cerberus Capital Management, bringing the bank’s total sold NPL exposures since end-July to almost €1.5bn.
The latest deals involve the sale of €137m secured and unsecured exposures, as well as three portfolios of predominantly unlikely-to-pay exposures in the Banca Mps and Mps Capital Services portfolios that total €202m. The latest transactions involve mainly secured UTPs, while the last transaction with Illimity involved the sale of mainly unsecured UTPs.
Massimo Famularo, board member at Frontis NPL, notes: “Some investors are interested in secured UTPs because the credit management is similar to non-performing loans. It’s mainly about finalising or maintaining real estate collateral before gradually selling them; you don’t need any turnaround skills. Investors, on the other hand, with a focus on unsecured UTPs would focus on turnaround management and not only real estate management.”
The choice of mix between secured and unsecured or a single focus on either depends on several factors. Famularo adds: “Investors can opt for a mixture of secured and unsecured, given the higher recoveries that entails, although returns would be lower compared to an unsecured portfolio.”
He continues: “Ultimately, it all depends on risk preference and management skills. Secured loans are less risky and yield lower returns, but they require pretty standard management skills. Unsecured loans, on the other hand, require different skills – and, for UTPs, it also involves turnaround management.”
The completion of the transactions represents a further step forward in Monte dei Paschi’s deleveraging, as envisaged by its 2017-2021 Restructuring Plan, and complies with commitments that have been undertaken with the European Commission.
Stelios Papadopoulos
News
RMBS
Red ahead
Non-resident Aussie RMBS hits the market
Columbus Capital is prepping a rare Australian RMBS backed by fully amortising (accounting for 86.1% of the pool) and interest-only converting to amortising investment loans to non-Australian residents. Dubbed Vermilion Trust No. 1 Bond Series 2019-1, the A$250m transaction is consequently not only exposed to macroeconomic events that affect Australia, but also to events that affect the borrowers' countries of residence.
S&P notes that unlike typical prime Australian RMBS, there are limited comparisons available for non-resident portfolios. As such, the rating agency applied a higher default frequency adjustment to reflect the wider macroeconomic exposure beyond Australia and the limited performance record of 100% non-resident portfolios.
The pool is exposed to borrowers residing in 13 locations, including China (accounting for 84.9% of borrowers), Malaysia (8.1%), Singapore (2.1%), Indonesia (2%) and Hong Kong (1.9%). S&P suggests that high exposure to a single country makes the transaction vulnerable to potential disruptions in cashflows, due to events affecting the flow of funds between countries. In its cashflow analysis, the agency consequently applied additional compressed default curves to simulate a possible concentrated disruption in cashflows to the trust.
Further, with all of the borrowers in the portfolio residing outside Australia, there is less homogeneity in the underwriting of such loans compared with the underwriting of borrowers who are residents of Australia. Challenges include less certainty in income verification, living expense determination, serviceability assessment, credit history checks and differing standards in verification documents.
Given these challenges, managing the arrears or recovery processes could be more difficult, should a non-resident borrower default. S&P therefore applied a higher default frequency as part of its analysis.
“Due to restrictions on non-residents purchasing established Australian dwellings, it is likely in a foreclosure scenario that newly built properties purchased by non-residents could only be sold to Australian residents. We applied an adjustment factor to our market-value-decline assumptions to reflect the potential difference between the price paid by one cohort (non-residents) versus the market value when such properties are sold to another cohort (Australian residents),” the agency adds.
Finally, given that all loans in the portfolio are to investors, S&P assumes the default frequency is higher to reflect the potential greater risk of default, compared with loans for home purchase.
The pool comprises 719 loans with a weighted-average current LTV ratio of 56.6% and weighted-average loan seasoning of 15.4 months. Of the loans, 4.7% are insured by primary LMI policies provided by Genworth.
There is geographic concentration in New South Wales and the Australian Capital Territory (accounting for 43.8% of the portfolio). Additionally, Victoria accounts for 33.9%, Queensland 20.3% and Western Australia 2.1%.
Provisionally rated by S&P, the transaction comprises A$136m triple-A rated class A notes, A$33.2m double-A class Bs, A$32m single-A class Cs, A$22.8m triple-B class Ds, A$13.7m double-B class Es and A$7.5m single-B class F notes. There is also a A$4.8m unrated class G tranche.
From the call-option date, the margins on the class C, D, E and F notes will step down and be paid as a senior interest component. There is also a residual interest component that is subordinated in the interest waterfall and has no access to the liquidity support in the transaction.
Corinne Smith
Market Moves
Structured Finance
CLO ESG impact assessed
Sector developments and company hires
ESG impact assessed
The credit impact of environmental, social and governance (ESG) investment criteria on CLOs rated by Moody’s remains neutral, the agency says in a report. The firm adds that while restricting the pool of CLO eligible collateral has the potential to be credit negative, CLOs limited exposure to the industries subject to ESG restrictions largely mitigates this risk.
Furthermore, Moody’s notes that that the performance of CLOs that were early adopters of ESG investment criteria has been comparable to that of CLOs without ESG restrictions. The agency highlights five CLOs in the last 18 months issued in alignment with ESG criteria and the firm has rated two of these from the US, Venture 38 CLO, Limited and Pikes Peak CLO 4 (PP4). Both of these prohibit the acquisition of collateral issued by an obligor whose principal business is directly derived from the production or marketing of controversial weapons (including antipersonnel landmines, cluster weapons and chemical weapons), the development of nuclear weapons programs or the production of nuclear weapons or thermal coal. PP4, in addition, also prohibits the acquisition of collateral issued by an obligor in the tobacco industry.
The report concludes that ESG criteria will continue to evolve, with short-term supply and demand imbalances of ESG collateral and potential pressure on CLO diversification unlikely to persist in the long term.
Online non-prime ABS debuts
US online lender, LendingPoint is marketing its first securitisation
backed by non-prime, unsecured, consumer installment loans. The US$169.386m securitisation, dubbed LendingPoint 2019-1, is backed by 18,760 loans to borrowers across the US and is provisionally rated single-A minus on the US$112.151m class A notes, triple-B minus on the US$24.517m class Bs, double-B minus on the US$22.555m class Cs and single-B minus on the US$10.163m class D notes.
Real estate firm makes strategic hire
Urban Exposure has hired Graeme Alfille-Cook, joining 2 September this year, as chief strategy officer. He has over 28 years' experience within the financial and real estate sectors having held various roles within Lloyds Banking Group, including md of Lloyds' commercial real estate development team. Prior to that he was a relationship director covering many of the bank's highest profile and complex real estate relationships. He also has extensive experience in the structured credit and securitisation markets, with other roles encompassing client coverage in the FMCG sector and risk.
Market Moves
Structured Finance
Volcker rule amended
Company hires and sector developments
Aviation firm appoints treasurer
Wings Capital Partners has hired Jakob Gallagher as vp, treasurer and capital markets. Prior to joining Wings, Gallagher served as vp on the MUFG aviation team who covered originations for the Americas. Prior to joining MUFG, he worked at Aircastle where he focused on capital markets and joint ventures. Jakob raised secured and unsecured financings for their platform (recourse and non-recourse) and managed investor relations. Prior to joining Aircastle, he held a role at Deloitte in the securitisation consulting practice.
Insurance president appointed
Hamilton Insurance Group has promoted its cfo Jonathan Reiss to president of its new strategic partnerships business unit. Tony Ursano, previously president of TigerRisk Partners, replaces him as cfo. Reiss’ new role includes oversight of the company's third-party capital platform, Hamilton Capital Partners. Hamilton has also completed its acquisition of Pembroke Managing Agency and its platform at Lloyd's, as well as Dublin-based carrier Ironshore Europe from Liberty Mutual Group.
Mexican legal firm bulks up
Solgarco has hired Jorge Martinez as partner focusing on asset-backed and structured finance, including project finance, real estate finance, securitisations and more. He was previously at Thompson and Knight.
Risk transfer platform
Cobbs Allen has formed CAC Specialty, a specialty insurance brokerage and investment banking platform designed to offer creative risk transfer solutions to public and private companies and private equity sponsors. CAC Specialty combines structured finance solutions with insurance broking capabilities and will be led by a team of experienced insurance and capital markets executives. Paul Sparks (who has more than 25 years of experience as the founder and head of the financial services division of McGriff, Seibels & Williams) will serve as executive chairman; David Payne (who was previously the chief revenue officer of JLT) will be the chief revenue officer; Jack Leventhal (senior md and executive officer at Teneo Capital) will lead the investment banking business; and Bruce Denson (president of Cobbs Allen) will serve as president. Teneo’s capital advisory business will maintain a strategic relationship with the firm.
Volcker Rule amended
The OCC and the FDIC have signed a final rule amending the Volcker Rule to tailor and simplify it while maintaining protections core to the safety and soundness of the federal banking system. The amendments aim to eliminate ineffective complexity and address aspects of the rule that restrict responsible banking activity, including clarifying the way in which banks trade securities using their own funds. Once the US CFTC, the Fed and the SEC have also approved the changes, they will be published in the Federal Register. Moody’s CLO analysts have reviewed the language provided by the FDIC and believe that the changes do not address the rule's provisions that are applicable to CLOs. Indeed, the agencies are still considering the ‘covered fund’ definition and related exemptions, and intend to address these in a separate proposed rulemaking.
Market Moves
Structured Finance
Warehouse line closed
Company hires and sector developments
CRE appointments
Arbor Realty Trust has appointed Danny van der Reis as evp, structured asset management, reporting to Arbor president and ceo Ivan Kaufman. In this newly developed role, van der Reis will be responsible for managing the structured asset management department and loan restructurings for all of Arbor's balance sheet loans, as well as strategically developing and expanding the company's special servicing function. He comes to Arbor with more than 20 years of commercial real estate finance experience and previously worked for LNR, where he was responsible for the restructuring of complex CMBS loans and the processing and resolution of all performing loan consent matters, including underwriting and structuring of sale and assumption transactions. He was also involved in underwriting thousands of loans included in CMBS as part of B-piece investments.
The Carlton Group has added Lino DiLascio as md in its New York City office, reporting to Carlton ceo Michael Campbell. DiLascio has more than 30 years’ experience in real estate finance and was previously md of Tremont Realty Capital and a principal at Johnson Capital’s New York office.
Warehouse closed
Venn Partners has closed a €550m warehouse funding line for prime Dutch residential mortgages originated by the Venn Hypotheken platform. The warehouse line is provided by two investment banks, which were selected following the receipt of competitive terms from several European, UK and Japanese banks. The deal is the fifth warehouse line for Venn’s Dutch residential mortgage business, bringing the aggregate amount of warehouse funding to €2.5bn since inception in 2013. Additionally, the business recently extended an existing whole loan forward flow mandate from a BeNeLux institution to €165m and expects to further increase this mandate over the next six months. Venn has also received several reverse enquiries from whole loan investors to acquire existing portfolios managed by the group.
Market Moves
Structured Finance
Broker charged over mispricing
Sector developments and company hires
Broker charged over mispricing
The US SEC has charged New York-based broker-dealer AOC Securities and its former ceo Ronaldo Gonzalez with failing to supervise AOC broker Frank Dinucci, who provided inflated price quotes to Premium Point Investments (PPI). The orders find that PPI traders dictated to Dinucci the prices at which he should value certain MBS in PPI portfolios, in exchange for the PPI traders sending securities trades to AOC. Though both AOC and Gonzalez knew Dinucci was providing price quotes to PPI on behalf of AOC, they failed to establish or implement policies or procedures reasonably designed to prevent and detect Dinucci’s misconduct. Without admitting or denying the SEC’s findings, AOC and Gonzalez agreed to pay penalties of US$250,000 and US$40,000 respectively. The SEC’s orders also censure AOC and impose a 12-month supervisory bar against Gonzalez.
PM appointed
Challenger Investment Partners has hired Tom Mowl as a senior portfolio manager in its London office, with a focus on offshore ABS. Mowl was previoulsy at WyeTree Asset Management where he was a portfolio manager focussing on US and European ABS.
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