Contents

Capital Relief Trades

Going concern?

Synthetics could help address UTP burden

Synthetic securitisation is being put forward as one way of proactively addressing the unlikely-to-pay loan burden in Italy. However, although risk transfer technology would allow banks to maintain their relationships with borrowers while benefiting from capital relief, the cost of such structures – among other challenges – may be prohibitive for some.

Robert Bradbury, head of structuring and advisory at StormHarbour, believes that synthetic securitisation of UTP loans is a natural evolution of the NPL market. “UTPs have high overall capital density,” he explains. “Given the more developed NPL market and that a bank should have already provisioned for its NPL book – meaning that such a transaction for those loans is unlikely to be feasible – risk transfer trades make more sense for UTPs, as they can protect against what a bank might lose, rather than what it expects to lose.”

Synthetic securitisation makes most sense in the context of a going-concern approach to the underlying; in other words, where the assets have the potential to return to performing status (SCI 17 May). According to PwC, a going-concern approach could include the promotion of new solutions – for example, rescheduling or forgiving debt and extending maturities – and the application of new financing, such as synthetic securitisation, potentially subject to a GACS-type mechanism.

However, a CRT referencing UTPs would need to consider loan workout processes, including timeliness of losses and recuperation of losses. “As risk transfer must be demonstrated, tranching would need to avoid being too risk-remote (given the likelihood of losses) and so the capital structure may have to be adjusted compared to a ‘standard’ risk transfer transaction. Alternatives to ‘standard’ risk transfer transactions might instead conceptually involve referencing a portfolio of single names, while borrowing risk transfer techniques,” Bradbury observes.

Indeed, PwC notes that as part of a proactive UTP management process, due diligence should be implemented on a single-name basis to identify the optimal deleveraging strategy. The first step in this process is to cluster the assets in a portfolio according to borrower characteristics, ticket size, vintage, available guarantees and so on and identify borrowers to be managed on a single-name basis.

The next step is to identify the potential of the assets to return to performing status (going- versus gone-concern) and determine an appropriate credit recovery strategy. A liquidation scenario may be most relevant in the case of gone-concern assets.

Nevertheless, one of the primary challenges in connection with synthetic UTP securitisations is getting internal buy-in to the idea that a bank may need to do this, compared to the increasingly well-understood processes involved in either NPL sales or risk transfer transactions referencing performing assets. “Because it’s a UTP portfolio, it’s arguably harder to proxy the pricing that may be achievable. It may also be harder to position the possible impacts on all the different elements that might drive such a transaction, which might include not only provisioning and regulatory capital, but also avoiding a deterioration of the book or exiting the UTPs altogether and getting them off the balance sheet, relative to the cost,” Bradbury observes.

Scope anticipates UTP disposals to reach a total of €13bn-€18bn this year, based on historical inflows and outflows. A number of sizeable UTP servicing and securitisation joint ventures have already been announced or are pending (SCI 7 August).

Other potential structured finance solutions envisaged by PwC for addressing the UTP challenge are debtor-in-possession structures and restructuring funds. Conceptually, the latter could comprise two sub-funds: a credit sub-fund, where banks securitise the non-performing exposures; and a new finance sub-fund, which is underwritten by investors and provides financing to borrowers. By transferring loan receivables in exchange for shares of the fund, banks would be able to derecognise the assets.

Corinne Smith

Structured Finance

SCI Start the Week - 2 September

A review of securitisation activity over the past seven days

Market commentary
A new Fitch study shows that there is a wide range in trustee reported market values for defaulted loans held by US middle market CLOs, highlighting the illiquidity of the sector. For example, term loans of Dimensional Dental Management are held in eight MM CLOs of four managers, with reported marks for the same loan varying from 70 to 97 (SCI 29 August).

Nevertheless, Fitch points out that substitution provisions are observed in most MM CLOs it rates, enabling managers to provide a backstop to illiquid distressed or defaulted assets and work out a resolution outside of the CLO structure with fewer limitations.

Stories of the week
Back to work
UK deal flow restarts ahead of expected busy months ahead
Esoteric opportunities
Structured solutions to address corporate risk transfer needs
Multifamily delinquencies ticking up
Growing student housing vacancies major factor
Regulatory boost
Italian SRT issuance picks up

Other deal-related news

• Satori Capital has announced an investment and acceleration partnership with Cicero Capital Partners. Satori is a multi-strategy firm with more than US$1bn in AUM and Cicero actively manages a portfolio of CMBS and other commercial real estate structured opportunities (SCI 27 August).
• DBRS has changed the trend on the class B, C, D and E notes issued by Elizabeth Finance 2018 to negative from stable. DRBS notes that the change is a result of the further deterioration of the UK retail sector, which could affect the performance of the Maroon loan by increasing: (1) the re-letting risk for the upcoming lease break options of some of the largest tenants in the portfolio and (2) the number of retailers entering into company voluntary arrangements or deciding to consolidate their space across the country (SCI 29 August).
• The EBA predicts that activity in the securitisation market should pick up in 2020 and 2021. The largest issuance volumes in 2019 are expected in the Netherlands, amounting to close to €7bn. Banks in France, Spain, the UK and Italy plan to substantially increase issuance volumes in 2020 and 2021 (SCI 29 August).
• A new regulation has been introduced in Portugal providing for the execution of regulation 2017/2402 of the European Parliament and of the Council, which lays down a general framework for securitisation. It also creates a specific framework for STS securitisation (SCI 30 August)

Data

BWIC volume

Upcoming SCI event
Capital Relief Trades Seminar, 17 October, London

Structured Finance

STS success?

Market warms to STS, but threats hover on the horizon

While STS lead to a dampening effect on ABS issuance at the start of the year, it is starting to bring in longer term investors, such as bank treasuries, according to panellists at S&P’s European securitisation seminar today. They added, however, that STS still presents investor and issuer challenges and warned that the stability of the market is threatened by Brexit uncertainty and the possibility of a second term funding scheme from the Bank of England (TFS 2).

Andrew Lennox, portfolio manager, Hermes Investment Management, said that the introduction of the Securitisation Regulation and STS at the start of the year had “clearly dampened” ABS and RMBS issuance, but not CLOs. He added that he didn’t think the market would grow in size this year, but said: “As investors, we get nervous about hearing more issuance is coming, because it can cause spreads to widen out – it’s good to have stable issuance volumes as we know where the market will be in in the next 6-12 months.”

More optimistically, Rob Ford, founding partner and portfolio manager, 24AM, said the fact the market is only a little short of last year’s issuance levels - despite the hiatus at the start of the year - is a “real credit to the market.” He added that there has been growth in consumer ABS and SRTs and that he has been “getting a lot of calls from new issuers” and seeing the “re-emergence of issuers we haven’t seen in a while” – all of these factors have put the market on “a good footing for the rest of the year.”

Gavin Parker, head of securitisation and collateral management, Lloyds said that for issuers and investors he “has seen dampening due to STS – [which is] still there and is a challenge for issuers to meet this. That said, issuers are more certain. I expect more STS and more non-STS transactions.”

He continued: “I expect the dampening effect to disappear – we’re seeing more US issuers coming to market and greater growing US participation in our deals. We’re also seeing interest in SRT and balance sheet management transactions. This is something we’re looking to do in future.”

Charles-Edward Poyet, svp, Kensington Mortgages said that - like most specialist lenders - his firm has been a non-STS issuer, “for now.” He added that, if clearer pricing benefits emerge for STS, his firm may look to issue STS transactions.

Parker also suggested that certain challenges still exist around STS, including applying it to master trusts and legacy transactions, adding that STS generally delays issuance by around three to four weeks. However, he also suggested that he has seen an “increase in the treasury bid” and so in time “we hope to see a pricing benefit for STS.”

Ford added to this that, in terms of pricing, one of the things “everyone is looking for in STS is greater liquidity” which is “starting to come”. He added that of the Silverstone transaction issued earlier in the year, around 68% went to asset managers but in the recent Aldermore transaction 60% went to bank treasuries and the “pricing reflected that.”

In terms of the outlook from a credit performance view, Andrew South, head of structured finance research, EMEA, S&P commented that, overall, the outlook is “positive in rating measures and underlying measures, with no obvious problems in collateral terms either.”

Contrastingly, Lennox expressed concerns that the longer the credit cycle continues, so lenders and investors may move down the credit spectrum in search for yield. Lennox noted that there are “things to be wary of” particularly because a benign, low default environment won’t continue forever and that “traditional indicators” of market health had “broken down” due to monetary policy and intervention.

He added that there are things to be aware of now, however, such as Libor replacement, adding that the market had been “good at getting to grips with it” so far. A bigger concern to the ABS market is the potential for another term funding scheme from the Bank of England and the threat of Brexit, he suggested.

Ford agreed that Brexit posed large challenges and that the lack of clarity as to the final outcome is problematic, but that “we do know it’s not going to be positive for the UK or EU if we don’t have a deal…but we still don’t know what the knock on will be.” For the time being, he noted that the prospect of TFS 2 is “the biggest impediment to the growth of the ABS market.”

He added that last time there was a race to the bottom in terms of asset spreads, with originators cutting prices and that TFS 2 could see a further race to the bottom and lower rates. Parker concurred that, for his bank, TFS 2 would meam going back to what it did in 2016, which was to curtail new issuance to one deal per platform, per year.

Parker concluded that, in terms of whether this bank will continue to issue RMBS when capital charges continue to penalise securitisations over covered bonds, he would still issue RMBS. One reasons for this would be in order to maintain a diverse funding range and investor base, and another that covered bonds aren’t always the best use of mortgage collateral.

Richard Budden

Risk Management

SME initiatives inked

EIF launches further guarantee programmes for businesses across Europe

The EIF has launched two new funding initiatives to support SMEs in Europe, including a first-of-its kind initiative in Finland. The second provides funding support for Lithuanian micro businesses and SMEs.

The Finnish programme comprises a guarantee agreement signed by the EIF and Finnish specialist lender, Finnvera. The guarantee is designed to facilitate around €190m of new lending for SMEs that are seeking to grow their businesses.

The operation is supported under the COSME Loan Guarantee Facility, backed by the European Fund for Strategic Investments (EFSI), the heart of the Investment Plan for Europe, or Juncker Plan. The EIF’s role in the process is to ‘counter-guarantee’ Finnvera, which will guarantee lending by local banks, including Aktia Bank Plc, Fennia Mutual Insurance Company, Nordea Bank Abp, OP-Services Ltd, Oma Savings Bank Plc and Savings Banks’ Union Coop.

The EIF will cover 50% of Finnvera’s guarantee, which in turn will guarantee 80% of the lending by the participating banks. As such, nearly €190m in new lending will be made available to Finnish SMEs under the first COSME operation of this kind in the country.

Furthermore, Finnvera does not require collateral, which favours businesses who operate in the service, trade or IT sector, for example. It is estimated that at least 2,000 Finnish businesses can profit from this scheme and, to apply, companies must have at least three years of prior activity and a positive credit rating.

Additionally, Vilnius Factoring Company, a private lending company in Lithuania, has signed a cooperation agreement with the EIF to issue microloans of up to €25,000. Micro-enterprises and farmers in Lithuania can now benefit from non-banking business funding opportunities under the EU Programme for Employment and Social Innovation (EaSI).

The Vilnius Factoring Company issues microloans of up €10m with a guarantee from the EIF. The agreement is backed by the Juncker Plan’s EFSI, which allows the European Investment Bank Group to invest in higher-risk operations.

Microloans will be provided to small farmers and enterprises with no more than nine employees. The annual turnover and the amount of assets these enterprises carry should not exceed €2m.

The EaSI programme provides micro businesses with better access to finance, by creating less stringent conditions than traditional banking sources and due to significantly lower collateral requirements. The funds can be invested in either the company’s working capital or its business development.

Renato La Fianza, ceo, Vilnius Factoring Company, comments that the firm has operated in Lithuania for a year and that there is a need for flexible financing instruments for micro businesses. He adds that it is “very important” to have trusted partners like the EIF to allow his firm to “expand the financing instrument packages available for micro businesses and farmers.”

To date, the Vilnius Factoring Company has been providing factoring services to micro businesses and SMEs and within a year of operations in Lithuania, the company has financed invoices valued at €113m and has provided services to 130 clients. At the middle of August, Vilnius Factoring Company had a financing portfolio of €23 million.

Richard Budden

RMBS

Reform plans released

GSEs to be recapitalised and repositioned

The US Treasury has released its plan to reform the country’s housing finance system. The Treasury Housing Reform Plan (THRP) consists of a series of recommendations that are designed to “protect American taxpayers against future bailouts, preserve the 30-year fixed-rate mortgage and help hardworking Americans fulfil their goal of buying a home.”

The THRP includes both legislative and administrative reforms, but notes: “Treasury’s preference and recommendation is that Congress enact comprehensive housing finance reform legislation. Although Treasury does not believe a government guarantee is required, Treasury would support legislation that authorises an explicit, paid-for guarantee backed by the full faith and credit of the federal government that is limited to the timely payment of principal and interest on qualifying MBS.”

It continues: “The explicit government guarantee should be available to the re-chartered GSEs and to any other FHFA-approved guarantors of MBS collateralised by eligible conventional mortgage loans or eligible multifamily mortgage loans. These guarantors would credit enhance the mortgage collateral securing the government-guaranteed MBS, such that the federal government’s guarantee would stand behind significant first-loss private capital and would be triggered only in exigent circumstances.”

The plan proposes that those guarantors should be supervised and regulated by the FHFA. “FHFA’s regulatory capital requirements should require each guarantor to be appropriately capitalised by maintaining capital sufficient to remain viable as a going concern after a severe economic downturn and also to ensure that shareholders and unsecured creditors, rather than taxpayers, bear losses. Single-family guarantors should be required to maintain a nationwide cash window through which small lenders can sell loans for cash and also should be prohibited from offering volume-based pricing discounts or other incentives to their lender clients.”

At the same time, the THRP warns that “the reformed regulatory framework should not create capital arbitrage or other regulatory incentives that bias mortgage lenders toward securitising their loans through guarantors. In particular, similar credit risks generally should have similar credit risk capital charges across market participants.”

The plan also argues for legislation that tailors the explicit government support of the secondary market. However, it says: “Continuation of limited government support for the secondary market should not be regarded as a federal preference for mortgage lending through the GSEs. To achieve a level playing field between the GSEs and other private sector competition, the regulatory frameworks governing the GSEs and other market participants should be harmonised and, in particular, the QM patch should be replaced with a bright line safe harbour that does not rely on the GSEs’ practices.”

The THRP is in response to a Presidential Memorandum issued President Trump on 27 March, “directing the Secretary of the Treasury to develop a plan for administrative and legislative reforms to address this last unfinished business of the financial crisis” (SCI 1 April). The plan has been submitted to the President for approval through the Assistant to the President for Economic Policy.

Mark Pelham

CLOs

Navigating the new

New European CLO investors must chart a steady course

The remainder of the year looks set to be an active one for European CLOs. To sustain growth, the market needs to find new investors, but they have a challenging course to navigate.

Some potential new CLO investors are understandably hesitant, given widely voiced regulatory concerns and related alarmist mainstream press reports about the next financial crisis being driven by a collapse in leveraged loans. Many, though, are looking beyond those stories and recognise that perhaps the same – if not worse – could be said of other sectors.

For example, the high yield and investment grade bond markets are seemingly not being scrutinised for the now-inherent leverage across the board and liquidity supported from external sources, such as ETFs and other retail structures. Should a broader crunch come and drive extensive outflows from such vehicles, there is no obvious source of replacement liquidity – especially now that bankers state, privately at least, they are no longer interested in vanilla bond market-making.

Direct lending has also created its own distractions. It is undoubtedly a sound concept with some highly successful proponents, but there are increasing signs of corners being cut and poor underwriting. Nevertheless, the black box non-mark-to-market nature of such investments has hitherto ensured that even smaller more cautious investors have allocations for direct lending, but have until now shied away from CLOs.

That is not to say all is rosy in CLOs either. Global economies are at the end of the credit cycle and while those with long-enough memories know that doesn’t mean there has to be a crisis, it does mean tougher markets. Not least that it becomes increasingly difficult to time investments.

Equally, the European leveraged loan market is seeing a dispersion in loan quality. Even ramping up new CLOs and therefore only dealing with new loans, which should be at their best, some managers now report that as few as one in two are getting their approval.

New loans are, however, changing hands. Some firms are being forced into a corner by the need to fulfil new issuance quotas, so have no choice but to add sub-optimal loans to their portfolios. While rumours of one manager without the luxury of a long ramp-up period buying a piece of every single loan on the market are perhaps apocryphal, there is no doubt that manager selection and tiering should go beyond lip service and market formality.

For new investors that can navigate beyond the various distractions and find the right structure in the right hands, the benefits are self-evident in yield hungry but risk cautious times. Take one recent real-world example of a new investor able to swap out of a triple-B Peruvian euro-denominated bond holding into similarly rated European CLOs.

Towards the end of August the bond – Peru, 3.75% 1mar2030 – was giving a yield to maturity in the high 50s basis points, while new issue generic triple-B CLO spreads were above 380bp. So the investor’s new position was effectively giving in excess of six times the old spread with no duration risk. At the same time, CLOs offer a Euribor floor that ensures a positive return, while the bond only offered a zero coupon floor.

Mark Pelham

Structured Finance

RAIT sale

Company developments and sector hires

Aussie bank secures warehouse line

Yellow Brick Road (YBR), an Australian non-bank lender, has received final credit approval from an Australian Bank for it to provide an initial A$120m RMBS warehouse facility. The facility will be provided to the intended RMBS programme trust manager, sponsor and servicer, Resi Warehouse Funding (RWF), which is currently a wholly-owned subsidiary of YBR, but which is intended to be owned as a joint venture as 50% by YBR and 50% by an international alternative asset manager (JV Partner). RWF has accepted the detailed credit approved securitisation warehouse term sheet.

RAIT sale

RAIT Financial Trust has entered into an equity and asset purchase agreement to sell substantially all of its assets to an entity owned by a Fortress Investment Group affiliate under Section 363 of the US Bankruptcy Code. The REIT has also filed for chapter 11 relief to facilitate the sale process and will continue to operate as a debtor-in-possession under the jurisdiction of the bankruptcy court. The stalking horse purchase agreement provides RAIT with a binding bid of approximately US$174.4m, along with the assumption of certain liabilities, which is subject to better offers in a forthcoming bidding process to be overseen by the bankruptcy court. The move follows the conclusion of a strategic review of the company (SCI 23 February 2018).

Structured Finance

Tesco portfolio disposal sealed

Company developments and sector hires

Auto deal debut

Oodle Financial Services is marketing an inaugural static cash securitisation of auto receivables extended to obligors located in the UK. Dubbed Downson 2019-1, the £353.4m transaction is provisionally rated Aaa on the £229.8m class A notes, A2 on the £75.9m class Bs, Baa3 on the £15.9m class C notes, Ba3 on the £14.1m class Ds while there are £17.7m of unrated class E notes. The portfolio comprises 41,298 loans tied to hire purchase contracts.

Insurance vehicle proposals

The PRA has set out some proposed updates to its approach and expectations in relation to the authorisation and supervision of insurance special purpose vehicles (ISPVs).  The CP is relevant to parties who wish to apply for, or have obtained authorisation as, an ISPV. It is also relevant to insurers or reinsurers seeking to enter into arrangements with UK ISPVs as a form of risk mitigation. 

The proposals in this CP aim to provide further clarity and elaborate on certain additional aspects of the PRA’s approach and expectations in relation to the authorisation and supervision of ISPVs. The Solvency II requirements in relation to ISPVs have not changed during this period but the PRA and applicants have gained experience of operating the regime in practice. The PRA considers that it would be helpful to update SS8/17 to reflect the experience gained over this period.

This consultation closes on 3 December 2019. The PRA invites feedback on the proposals set out in this consultation, and on whether there are any other areas where further clarification on the PRA’s approach to the authorisation or supervision of ISPVs would be useful.

Non-bank expansion

La Trobe Financial has expanded its executive team with several senior banking hires. One of these includes David Bleakley who joins as vp, treasury and settlement services. He was most recently chief risk officer, North America for ANZ in New York and has previously worked as head of ABS and structured credit operations with the National Australia Bank in Melbourne.

The firm has also hired Rick Drury as senior executive chief lending officer, commercial. He has experience within credit risk and portfolio management and led teams through the financial crisis, focussing on consensual debt workouts, turnaround and restructuring. He was most recently md at the Australia National Bank’s UK commercial real estate run-off business.

Platform launched

Vincent Gessler has launched a new securitisation platform, titled Gessler Capital. The firm aims to provide a securitisation platform to provide off-balance sheet products to clients, as a business introducer and market-analysis provider for international clients.

Tesco mortgages sold

Tesco Personal Finance has sold its mortgage portfolio – comprising over 23,000 customers - to Lloyds Banking Group for a cash consideration of circa £3.8bn. The portfolio has a lending balance of circa £3.7bn and generated pre-tax profits of £9.1m in the 2018/2019 financial year. As part of the sale, the entire residential mortgage portfolio and arrangements for the ongoing administration will transfer to Halifax. It is anticipated that beneficial ownership will transfer at end-September with legal title occurring by end-March 2020.

Structured Finance

Structured credit vets nabbed

Sector developments and company hires

EBA makes STS digital move

The EBA has announced that it has added the STS Regulation to its online Interactive Single Rulebook and Q&A. It allows market participants to access the EBA’s guidelines, and it will also enable them to ask questions on any aspect of the criteria where it is felt require clarification under the EBA’s continuing power to issue guidelines.

PCS comments that this will be a vital tool, going forward, as many issues of a highly technical nature arise in its verification work and so welcomes the latest step from the EBA.

Performing credit team makes senior hire

Angelo, Gordon has hired Michiel von Saher as an md based in London, expanding the firm’s performing credit team to 13 dedicated investment professionals, including four in the UK. He is responsible for leading European performing credit research and identifying credit investment opportunities across the region. He comes to Angelo, Gordon with 24 years of experience as a credit analyst in Europe, most recently as an md and head of the European credit research team at PGIM fixed income, where he was also co-chair of the PGIM fixed income ESG committee.

RBI recommendations

The Reserve Bank of India’s task force on the development of a secondary market for corporate loans (SCI 30 May) has since submitted its report to the governor of the central bank. Among the key recommendations of the task force are: the establishment of a self-regulatory body of participants to finalise detailed modalities for the secondary market, including standardisation of documentation, and a central loan contract registry; the establishment of an online loan sales platform to conduct auctions; amending regulations applicable to the securitisation and assignment of loans, asset reconstruction, foreign portfolio investment and external commercial borrowings; and enabling the participation of non-banking entities. Comments on the report may be submitted by 30 September.

Structured credit vets nabbed

GreensLedge has hired Matthew Natcharian and Derek Yaworsky to lead structured credit investing at the firm.  Natcharian was previously head of the structured credit investment team at Barings, while Yaworsky was an md at Barings within structured credit trading.

Structured Finance

Ceo appointed

Sector developments and company hires

Analytics head nabbed

Merion Square Capital has hired Jeff Fraser as head of analytics, based at the firm’s Ardmore, Pennsylvania headquarters. Fraser joins Merion Square from Chubb, where he was an avp of CAT Pricing and Systems, responsible for Chubb’s catastrophe pricing, portfolio optimisation and global risk aggregation platforms.

Ceo appointed

Cairn Capital Group has appointed Nicholas Chalmers as ceo, replacing Paul Campbell. Campbell has been ceo since he co-founded Cairn Capital in 2004 and will continue to serve the firm as a senior adviser, remaining as a member of the investment committee and capital allocation committee. Chalmers was previously ceo and president of Oceanwood Capital Management, and will join Cairn Capital’s executive management committee and board. 

MOBI member

Global Debt Registry has joined Mobility Open Blockchain Initiative (MOBI), a global consortium of automakers, technology-based start-ups and other mobility players. As a member of MOBI, GDR will collaborate with industry leaders in pursuit of the creation of a minimum viable ecosystem that aims to standardise blockchain and related technologies to facilitate transparency and reduce frictions and transaction costs in mobility. GDR brings expertise in the application of blockchain to auto finance transactions, including how loan data and documents can be better managed on-chain to support automation, faster transactions and emerging new business models. 

Trade receivables programme launched

FastPay has launched a receivables securitisation program with the first tranche of US$80m, and senior funding and trade insurance provided by AIG. This program will offer significant capital to the media and technology sector and allow FastPay to open the door for larger, global media and tech clients to access working capital backed by their trade accounts receivable. AIG is providing senior funding, specialist trade finance insurance, and back-up servicing with additional funding provided by an investment vehicle managed by Cairn Capital. Available immediately, this FastPay facility allows enterprise companies to secure working capital within a structure custom-built for the needs of the media industry.

Structured Finance

ILS deputy head hired

Company hires and sector developments

Blockchain standardisation steps taken

The standardisation of blockchain technology, which the International Organisation for Standardisation (ISO) and others are promoting, will be credit positive for future securitisations that utilise the technology, says Moody’s. Although the technology itself has the potential to provide many benefits to the securitisation market, namely via interoperability and operational efficiencies, the current lack of standardisation holds back market adoption.

Moody’s add that standardisation of blockchain technology would make its benefits more accessible and that blockchain standards will likely emerge by 2021. Global blockchain standardisation is primarily driven by the ISO, which established in 2016 a technical committee on blockchain and distributed ledger technologies (DLT). The rating agency adds that the currently fragmented blockchain landscape limits its benefit to securitisations.

Deputy head announced

Stephan Ruoff, until most recently group ceo of Tokio Millennium Re, will assume the newly-created role of deputy head of Schroder Secquaero in November. Stephan brings with him long-standing and extensive underwriting and management experience. As the former ceo of Tokio Millennium Re, which acted as a transformer for many ILS managers, he has a broad and deep knowledge of the alternative capital market for reinsurance.

Euro md appointed

Intermediate Capital Group (ICG) has appointed Julia Beinker as an md to support its growing distribution activities in Europe, with an initial focus on Austria and Germany. Beinker joins ICG from Muzinich & Co where she has worked for the past three years as an md responsible for growing the Company's client base in Austria and Germany.

Junior portfolio manager appointed

Spire Partners has appointed Daniel Bates as a junior portfolio manager, focused on structured credit investing. He was previously a junior portfolio manager at WyeTree Asset Management and will broaden Spire’s capabilities as it continues to grow its product offering to investors.

Permanent amendments

The transaction documents for the Permanent Master Issuer 2011-2, 2015-1, 2016-1 and 2018-1 RMBS have been modified to ensure that the programme complies with and is eligible for designation under the STS framework. The documents have also been amended to reflect the potential cessation of Libor. Specifically, the interest rate paid on the notes has been changed to Sonia and appropriate provisions made for any US dollar denominated notes to be issued by the master trust.

Reinsurance and portfolio solutions head hired

BPL Global has hired Gregory King-Underwood as director and head of global reinsurance and portfolio solutions. The firm notes that his hire comes at a time of rising synthetic securitisation and growing synergies between credit and political risk insurance and reinsurance markets.

Valuations scam uncovered

The US SEC has charged Live Well Financial and its ceo, Michael Hild, with perpetuating a multi-million dollar bond mismarking scheme against Live Well's short-term lenders. The complaint also charges Live Well's cfo, Eric Rohr, and evp, Darren Stumberger, both of whom consented to partial judgments against them.

The US SEC alleges that Live Well, under the direction of Hild, fraudulently inflated the value of its portfolio of complex reverse-mortgage bonds.  According to the complaint, Hild directed Live Well to submit falsely inflated bond prices to an industry-leading pricing service, who he knew would simply publish the prices Live Well gave it. As Hild was aware, most of Live Well's lenders relied on those inflated prices in loaning money to Live Well through repurchase securities transactions. Through this alleged scheme – which Hild called a "self-generating money machine" – Live Well was able to borrow tens of millions of dollars more from its lenders through the securities transactions than it could have borrowed had the bonds been priced accurately and was able to fund lavish compensation packages for Hild and others. 

During the 18 months following the implementation of the scheme, Live Well's bond portfolio shot up in value from US$71m to US$570m. According to the complaint, the fraudulent scheme collapsed in 2019 when Live Well's lenders sought to sell the bonds back to Live Well and Live Well did not have the requisite funds to complete the repurchase securities transactions, leaving its counterparties exposed to losses in excess of US$80m. In a parallel action, the US Attorney's Office for the Southern District of New York has announced criminal charges against Hild, Rohr, and Stumberger.