Contents

ABS

Accessing guarantees

CBILS securitisation warehouses mulled

Securitisation is gaining traction as a way for a wider investor base to access coronavirus-induced government stimulus packages. The technology could also be leveraged to provide much-needed liquidity to SMEs.

Orrick partner Richard Hanson, for one, is aware of non-bank accredited lenders seeking to warehouse Coronavirus Business Interruption Loan Scheme (CBILS) loans via a private securitisation structure. Under such a structure, a non-accredited non-bank lender could purchase the senior tranche of the debt, while a credit fund may purchase the junior tranche.

“It’s an interesting way for that non-accredited lender to achieve exposure to CBILS and indirectly benefit from the 80% government wrapper,” observes Hanson.

He suggests that some banks might not have the appetite to invest in the senior tranche of such a structure, due to the 35% liquidity coverage ratio haircuts applicable to Level 2 ABS and the likely returns. However, given the amount of liquidity that banks have at the moment, some may be more interested in acquiring a CBILS portfolio that has been originated by an accredited lender on a whole loan basis. This is based on the assumption that only the originator needs to be accredited, while anyone should be able to buy a portfolio that is already seasoned, although CBILS guarantees are specific to the accredited lender.

Hanson notes that becoming a CBILS-accredited lender is a relatively slow process, yet non-bank lenders applying for accreditation require their own funding but may not have enough balance sheet. As such, they may utilise securitisation by transferring CBILS loans to an affiliate that also shares in that lender’s CBILS allocation, which then issues debt.

“Private warehouse facilities make sense in this context because they enable lenders to raise funds quickly and ramp up their book. Once a warehouse reaches critical mass, the lender may issue a public securitisation, subject to market conditions,” he suggests.

He adds: “There are some conceptual issues to work through - including how to transfer the benefit of the government guarantee - but I suspect those lenders will be thinking about ways of doing public securitisations in the future. As CBILS loans are up to six years in duration, with loans in CLBILS up to three years and Bounce Back Loan Scheme six years, that provides an idea as to the likely timeline.”

Another potential avenue for CBILS securitisation is in the commercial real estate sector. Guidance under the scheme indicates that property investment companies are included under the SME definition, which opens up the possibility for both real estate development finance and real estate investment finance being included in CBILS.

“CRE investors are looking at raising CBILS-specific debt funds to originate loans to propcos and/or to refinance existing debt to propcos, with the assets potentially being securitised or levered using loan-on-loan financing. Again, this could be a way for other funds to gain exposure to government stimulus packages and indirectly benefit from guarantees,” Hanson confirms.

A further way that securitisation may gain traction is as a means of providing liquidity to SMEs. Hanson cites fintech companies that have established relationships with SMEs as an example of entities exploring how they can set up efficient and sustainable lending platforms using securitisation technology.

“In this regard, we have looked at structures whereby such entities could extend merchant cash advances to pre-qualified SMEs to compensate for lost sales for a certain period of time. The receivables related to those merchant cash advances can be securitised and the securitisation debt subscribed for - or guaranteed, as applicable - by governments, banks and funds as an accountable and efficient form of extending much-needed help. In principle, those merchant cash advances (and therefore the related securitisation debt) would be repaid at the point of sale from a percentage of the businesses' receivables once activity recovers,” he concludes.

Corinne Smith

ABS

Marketplace merit

Online lending resilient amid impairments

The performance of online lending platforms remains resilient, despite coronavirus-related pressures. Indeed, dv01 data suggests that total loan payment impairments are showing signs of slowing down, after peaking earlier this month.

Vadim Verkhoglyad, principal analyst at dv01, says: “It looks like total impairments peaked at last in the immediate term. There was a normal seasonal spike in early May as the majority of loans came due, but it was the lowest spike we have seen since 2019 and earlier. Since our previous report [in early May], the number of post-modification payments has jumped from 3% to 25%.”

The majority of payment due dates are in early May and borrowers appear not to be becoming impaired prior to their due dates. “The marketplace universe has really shown its merit, not just in its performance. Issuers got up to speed very quickly in terms of how to approach borrowers and how to get ahead of their economic hardships. We are seeing how different it is when consumers have been seeking other debt relief,” notes Verkhoglyad.

At the same time, consumers entered this period in a strong position. “They are facing an external crisis, not one they have created. In 2008, there were specific pockets that were heavily impacted,” Verkhoglyad adds.

In terms of marketplace loan issuance, May was relatively strong. Verkhoglyad says: “Some decline was voluntary to tighten credit boxes. Loans are being provided at better rates and issuance has continued, as well as support. The marketplace universe has been tried and tested during something that is beyond the great recession. The space has weathered that quite well.”

Wei Wu, principal data scientist at dv01, concludes: “Online lending is most sensitive to credit shocks and the crisis has shocked the consumer system. In this environment, that makes the MPL market the forefront of how the consumer reacts to the shock. Timely data shows what the current situation is and there are very hopeful and encouraging signs.”

Jasleen Mann

Capital Relief Trades

Risk transfer round-up - 29 May

CRT sector developments and deal news

ABN AMRO is rumoured to be readying a corporate capital relief trade that is expected to close in 3Q20. The transaction would be the lender’s first post-crisis synthetic securitisation.

NPLs

Galaxy returns

Alpha relaunches NPL ABS

Alpha Bank is relaunching its project Galaxy non-performing loan ABS following the coronavirus disruption, with the aiming of closing the securitisation in 4Q20. At the same time, the National Bank of Greece has postponed an NPL ABS deal that was initially scheduled for 3Q20.

The Galaxy securitisation was announced last year and references retail secured and wholesale non-performing loans (SCI 20 November 2019). The deal will be accompanied by a carve-out of the bank’s NPE management platform to servicing firm Cepal Hellas and the sale of New Cepal to investors. New Cepal will consist of Alpha Bank’s platform and Cepal Hellas, and investors will acquire a controlling stake in it.

The bank has confirmed the conclusion of the portfolio’s securitisation and progress on the rating workstream in regards to the retail secured loans. According to its 1Q20 results, the transaction is backed by a €7.6bn retail secured and a €3bn wholesale portfolio. The Greek lender is prioritising HAPS portfolios and, in particular, retail secured assets.

Hence the focus for this year is a perimeter of anything between €7.5bn and €10bn. Alpha Bank notes that the implication of this is a less capital-intensive transaction, even under stricter Covid scenarios. If the bank transacts on the HAPS perimeter, it expects a capital impact below 300bp. Recent pandemic-related government measures to support housing loans are expected to provide a significant boost to the portfolio.

Meanwhile, from the National Bank of Greece’s perspective, any relaunching of its NPL securitisation will depend on timing and market conditions. One major uncertainty for the lender is the NPE impact of Covid and, in particular, what happens after the termination of payment holidays in 4Q20. The bank disclosed in May 2019 that it would securitise €3bn of non-performing mortgage loans by 2022 (SCI 20 May 2019).

Overall, Covid is expected to complicate the NPL reduction plans of the large Greek systemic banks. Lenders had been ramping up preparations to execute around €32.5bn of securitisation volumes in the coming quarters via the HAPS scheme (SCI 9 April).

Stelios Papadopoulos

Structured Finance

Persistent opportunity

Tor Trivers, md and head of the structured credit group at CDIB Capital, answers SCI's questions

Q: How and when did CDIB Capital become involved in the structured credit market?
A: CDIB Capital was established in 2006, as the private equity arm of China Development Financial, with the objective of deploying and diversifying the group’s proprietary capital outside of Taiwan. The firm has historically managed outside funds, but no credit-related assets until I joined in February (SCI 29 April).

Based in Hong Kong, my team has been tasked with expanding into additional strategies for both outside investors and the CDIB balance sheet. Credit provides a different risk/reward profile for the firm and the aim is to start the strategy on balance sheet in advance of raising a fund. We believe a good way of gaining traction is to develop a core of five to seven deals, build the portfolio up from there and then bring large external commitments onboard.

For a strategy like ours, US$500m-US$1bn is the right sort of size for a fund, depending on a number of factors.

If markets normalise relatively quickly following the coronavirus pandemic, we could start assembling a fund by early 2021. While we can diligence investments in Hong Kong at the moment, it’s more difficult to diligence them elsewhere in the region due to travel restrictions.

Q: What are your key areas of focus today?
A: Our focus is on direct lending via securitisation or other secured bond formats, in order to create consistent returns with strong downside protection. Our sweet spot is private credit and specialty finance, including consumer finance, trade finance, property and infrastructure assets.

We have already closed one financing, which involved a Korean consumer finance company, whose business is in high-coupon personal loans. The deal wasn’t a securitisation, but the collateral package was bankruptcy remote.

Q: How do you differentiate yourself from your competitors?
A: Asia is fragmented and behind the rest of the world in terms of the investment landscape. Although a few performing credit funds have emerged in recent years, funds in the region tend to be smaller and the structures tend to be simpler.

The region lacks the broad spectrum of structured finance buyers seen in Europe and the US. The real money investor base is growing, but it is a fraction of the size relative to other regions, and there is not the same indigenous asset management industry or expertise in these assets, so the private credit asset class has been slower to emerge.

Five years ago, it was rare for a fund to make credit investments in companies. If a company needed capital, historically, they typically would either ask their bank or raise equity.

Our investments are in the range of US$15m-US$50m each and involve companies that are underserved by the typical providers of financing. As financing options are limited in the region, there isn’t a large amount of competition for our strategy.

Q: What is your strategy going forward?
A: Our investments will typically have securitisation-like features; there is always collateral and the financings are bankruptcy-remote where possible. For some assets and jurisdictions, it’s not always possible to be bankruptcy-remote, but we’ll always be well protected.

For our prior fund, for example, 20% of our investments were real securitisations, 40% had securitisation-like features (so roughly 60% were bankruptcy-remote) and 100% had a first-lien perfected priority on the assets. The aim is to create defensively structured transactions, featuring collateral test triggers, jurisdictional diversification, eligibility criteria, concentration limits and strong security packages.

Q: Which challenges/opportunities do you anticipate in the future?
A: Asia is receiving more attention from some large global players, which has spurred some local advisors - who had never previously focused on private credit – to begin thinking about it. Asia represents two-thirds of the world’s population and more than one-third of the global economy. Private credit represents a long-term persistent opportunity in the region because convergence with the scale of real money and private capital in the rest of the world is moving at a measured pace.

With the outbreak of Covid-19, the opportunity has expanded in terms of availability of investments and the returns on offer. Markets were pricing a continuation of perfect scenarios last summer and it made sense to have downside protection in such an environment.

Given the unexpected dislocation we’re experiencing now, it seems like opportune timing to be launching a credit fund. Many companies are experiencing difficulties due to the coronavirus fallout and they will need financing to get through the crisis.

Corinne Smith

NPLs

Lift off

Francesco Di Costanzo, head of structured credit at Hoist Finance, answers SCI's questions

Q: How and when did you become involved with securitisation?

A: We are a licensed credit market institution, regulated as a bank, which gives us the advantage of low cost and consistent funding. However, this means, of course, that we are subject to bank capital requirements.

Over the years we have bought unsecured non-performing loan portfolios, to which a 100% risk-weighting had typically been applied. However, in December 2018, our regulator, the Swedish Financial Supervisory Authority (SFSA), changed its interpretation of Article 127 of the CRR to fall in line with an updated view of the EBA.

That meant the SFSA would impose a 150% risk weight on our unsecured NPL portfolios, resulting in a CET1 decrease from 13% to 9.7% over night. So it quickly became obvious that we had to act and we felt that securitisation was the best avenue to pursue.

Q: What did you do?

A: We decided on a two-step approach – first launching an unrated transaction (Pinzolo – SCI 1 August 2019) and then rolling it into a more innovative rated structure (Marathon – SCI 7 November 2019).

The idea behind the split was to maximise the efficiency of the whole process. The simpler unrated nature of the first transaction enabled us to move quickly and free up capital fast.

The second transaction would obviously require extensive discussions with the rating agencies and take more time in general to structure because of its innovative nature. But we felt it would be worth it, as ultimately it would provide an even better deal for us and the investor – CarVal.

Pinzolo referenced a €225m portfolio of Italian unsecured non-performing loans with a stretched senior note representing 95% of book value placed with CarVal at the end of July 2019. Hoist retained the 5% junior tranche and booked a CET1 deduction, fully provisioning the tranche and enabling the related RWAs to be removed from our prudential balance sheet, thereby releasing capital for new acquisitions.

With that in place, we could fully focus on Marathon and while the Italian NPL market typically utilises GACS-like transactions - where issuers replicate terms because rating agencies have seen them before, so it is easier to get a deal to market - we wanted to go further. So beyond being the first-ever rated securitisation backed exclusively by unsecured NPLs, Marathon had two innovative features.

First, we implemented a pro-rata amortisation mechanism between senior and mezzanine notes, accelerating the repayment of the mezzanine notes. Second, we built a strong alignment of interest between noteholders as Hoist continued to service the portfolio and is entitled to the excess collections after repayment of the junior notes.                                                                                               

Once the rating and investor processes concluded, the assets from Pinzolo were transferred into Marathon, which closed on 5 December 2019. The deal now had a gross book value of €5bn, the total notes issued were €337m split into 85% of senior notes and 15% mezzanine and junior notes.

The senior notes were retained by us and rated investment grade by DBRS Morningstar, Moody’s and Scope. The mezzanine and junior notes were placed at par with CarVal featuring a capped target return.

The transaction resulted in a significant reduction in the RWA attributed to our post-transaction exposure (using the SEC-ERBA). To be clear, we are not circumventing the current capital adequacy regulation as significant risk is actually transferred.

Q: How did this affect your business?

A: Put simply, it has changed and improved our business dramatically. We moved from the end of 2018 with a concerning capital issue to the end of 2019 where we had sorted out that situation and were able to deploy our capital elsewhere. Our successful and innovative entry into the securitisation market has really put us on the map and opened up new opportunities.

For example, thanks to our much improved CET1 ratio and freed-up capital, we were able to execute our largest portfolio acquisition ever with the purchase of a French non-performing mortgage portfolio with more than 3,500 claims and an outstanding balance of approximately €375m (SCI 19 December 2019). As a result, we are now the largest NPL servicer in France.

Q: What is your strategy going forward?

A: We view securitisation as not only a means to solve problems and structure capital relief trades, but also as providing a tool-kit for running our business in the future, including underpinning our funding and capital management needs. Securitisation is now an intrinsic part of our strategy and we’re looking forward to doing more deals.

Marathon’s focus was on the back book to enable us to show our shareholders what was possible to achieve. However, we don’t intend to stand still and view all our other asset acquisitions, existing and future alike, as capable of being incorporated into our securitisation framework.

Q: Which challenges/opportunities do you anticipate in the future?

A: Obviously the biggest challenge is the same one facing everyone – Covid-19. We are fortunate enough to be able to have a reasonably positive outlook on the future. Due to the size of deals, we don’t need large numbers of investors to get involved and those that we are in touch with are capable of seeing beyond the turmoil to the opportunities that lie ahead.

Mark Pelham

About Hoist Finance

Hoist Finance was founded in 1994 and has subsequently shown strong, profitable growth. It now operates in 11 European countries with more than 1,700 employees. Hoist Finance has become one of the leading debt management companies in Europe and was listed on Nasdaq Stockholm in 2015.

The company purchases both performing and non-performing loans from its partners, international banks and financial institutions, to enable them to free up resources for their respective core business. In addition, Hoist Finance contributes to upholding a sustainable, fair and stable credit market by helping banks to offload their balance sheet, so that they can meet their regulatory requirements.

Structured Finance

Pan-European guarantee fund launched

Sector developments and company hires

Pan-European guarantee fund launched
The EIB board has approved a €25bn Pan-European Guarantee Fund (EGF) - which will be funded by EU member states pro rata to their shareholding in the bank – as part of its overall response to the Covid-19 crisis. By guaranteeing parts of portfolios, operations under the guarantee fund will free up capital for financial intermediaries to make more financing available for SMEs and mid-caps, providing up to €200bn of additional financing. By pooling credit risk across the entire EU, the overall average cost of the fund will be significantly reduced compared to national schemes. The use of the EIB also means that all member states will benefit from sharing the bank’s top credit rating. Additionally, the EIB is implementing the emergency measures announced in March to repurpose existing guarantees (SCI 18 March).

In other news…

Advancing mechanism implemented
The Fanes Series 2018 Italian RMBS issuer has announced that in order to address the Covid-19 emergency, Cassa di Risparmio di Bolzano - in its capacity as servicer and originator on the deal - intends to grant borrowers payment holidays in relation to an outstanding principal exceeding 5% of the collateral portfolio outstanding principal at the date of the relevant suspension. Payment holidays can be granted from 9 March until 31 December 2020 and could last for a period which cannot exceed 18 months. As such, CR Bolzano has implemented a mechanism to advance the Covid suspension's installments, which aims to protect noteholder interests.

North America
Greystone has appointed Philip Miller as an md in a newly created role, which focuses on developing proptech strategies across the firm’s lending platforms. Miller joins Greystone from MUFG, where he was head of CMBS. Based in New York, he will report to Greystone’s chief technology officer Jonathan Russell.

Owl Rock Capital has hired Jesse Huff, who will serve as co-head of the firm’s opportunistic investing strategy, together with Owl Rock md Nicole Drapkin. Huff was most recently an md and member of Oaktree Capital Management’s strategic credit platform, where he had been focusing on opportunistic credit since 2014. Prior to Oaktree, he was the global head of distressed debt trading and sourcing at The Carlyle Group and held a variety of positions across the risk arbitrage and financials and special situations divisions at Bank of America Merrill Lynch. Drapkin will take on this new role after helping to build Owl Rock since its inception nearly five years ago. Prior to Owl Rock, she was a principal in the principal credit investments group at the Canada Pension Plan Investment Board and also worked at Goldman Sachs.

NPL fund closed
Investcorp has announced the fully subscribed final closing of approximately €340m in commitments for its second vintage Italian Distressed Loan Fund II, which is exclusively advised by Eidos Partners. The fund invests in non‐performing loans secured by residential and commercial real estate in Italy. To date, more than €460m in assets have been allocated towards Investcorp and Eidos Partners’ Italian NPLs strategy. 

TALF ratings expanded
The New York Fed has updated its TALF FAQ document to include securities rated by DBRS Morningstar and KBRA, to the extent that they also have a qualifying rating from one of the ‘big three’ rating agencies. Specifically, eligible securities must have the highest rating from two eligible NRSROs. One of the two ratings must be from Fitch, Moody’s or S&P, while the other may be from DBRS Morningstar or KBRA.

Structured Finance

No call for OATH 1

Sector developments and company hires

No call for OATH 1
UK Mortgages and TwentyFour Asset Management have notified Oat Hill No. 1 bondholders that the RMBS will not be redeemed on its first refinancing call date of 27 May (SCI 22 April). TwentyFour says the transaction was not called as, due to the Covid-19 situation, financing markets were only available at relatively expensive levels that did not reflect the quality of the underlying portfolio. Despite a general improvement since April, the firm believes that better opportunities are likely in the months ahead. Oat Hill No. 1 is callable every quarter and conversations regarding the refinancing of the transaction are continuing.

In other news…

Call for expressions of interest
In order to clarify arrangements for prospective draws for interest forbearance and operational matters with regards to using the Forbearance SPV (SCI 28 April), the AOFM is seeking expressions of interest from SFSF-eligible lenders. Lenders submitting such an expression of interest should indicate: the number of related trusts expected to access the programme; the asset type and assets under management for each trust; the weighted average interest rate on assets for each trust; the number and volume of assets currently in Covid-19 hardship for each trust; and the number and volume of assets currently in 30-plus and 90-plus days arrears for each trust.  

Disclosure DTS clarified
ESMA has updated its Q&A document on the Securitisation Regulation, clarifying different aspects of the templates contained in the draft technical standards on disclosure. In particular, the document clarifies how several specific fields in the templates should be completed, including questions that are specific to fields in the ABCP template. The document also contains clarifications addressed to securitisation repositories. ESMA says it will continue to develop this Q&A on the Securitisation Regulation in the coming months and update it where required.

EMEA
Alantra has expanded its credit portfolio advisory (CPA) team with the appointment of Marcus Evans and Christos Stefanidis, who will join as mds in the UK and Greece respectively. Evans brings over 19 years’ experience in assisting clients deleverage credit portfolios and sourcing and optimising capital. He was until recently an FS deal advisory partner at KPMG, where he led the firm’s European FS deals network in its ECB office. Stefanidis previously worked for 16 years at PwC as a director in its deals/corporate finance team, focusing on financial services transactions, including non-performing loan sales and credit servicer carve-out transactions. Separately, Alantra has increased its global footprint by establishing dedicated CPA offices in Sao Paulo, Brazil and Shanghai, China. The former comprises two full-time senior advisors and a target size of five team members in 2020, while the latter consists of two professionals.

Juan Carlos Martorell has left Mizuho International, where he was md and co-head of structured solutions. Sources suggest that the bank’s appetite for origination in structured credit has diminished and, as such, it has reduced the headcount of the structured products solutions team by half. At Mizuho, Martorell executed internal and external landmark synthetic securitisation transactions totalling in excess of €1.5bn of tranches, such as: Gaudí for CaixaBank; Mespil for Bank of Ireland; and the first risk transfer for a Multilateral Development Bank (Room2Run). He is rumoured to be discussing opportunities with both the sellside and the buyside, remaining in structured credit more broadly.

Hertz bankrupt on missed payment
Hertz Global Holdings last week filed for Chapter 11 bankruptcy, following unsuccessful efforts to negotiate a restructuring of its lease obligations. Hertz relies on proceeds from vehicle sales, in addition to its normal operating cashflow, to service its ABS vehicle obligations. However, substantially weaker conditions in the used car market have caused Hertz's liquidity to become severely constrained. This led the company to miss a lease payment due on certain of its unrated ABS vehicle securities on 27 April. On 4 May, it entered into forbearance on these payments through 22 May. The bankruptcy filing ended the forbearance and limited waivers period regarding the lease payments, with S&P subsequently lowering its issuer credit rating and issue-level ratings on Hertz to single-D. S&P’s recovery ratings on the company's debt issues remain unchanged at this time because Hertz has yet to indicate its capital structure pro forma for the filing.

North America
Slate Asset Management intends to deploy up to C$500m of transitional capital to provide liquidity to the Canadian real estate industry, especially those impacted by the Covid-19-induced market disruption. Concurrently, Slate has appointed Doug Podd as md in its Toronto office. Podd joins the firm with more than 25 years of experience in commercial real estate lending and previously served as Canadian lead for Brookfield Financial's debt advisory business, where he directly placed in excess of C$4.5bn of real estate and infrastructure debt.

RFC on CRE approach
Scope Ratings has issued a request for comments regarding the publication of its CRE security and CMBS rating methodology. The proposed methodology offers an expected loss framework to analyse debt instruments secured by commercial real estate, including direct exposures to CRE securities or CMBS and CRE CLOs. The methodology focuses on an asset-specific cashflow analysis to assess a CRE security’s probability of default, its estimated recovery and the extent of any resulting expected loss. The methodology, as proposed, would have no impact on the ratings of outstanding transactions. Comments on the proposed methodology are invited by 30 June.

Structured Finance

Renewables JV inked

Sector developments and company hires

Renewables JV inked
By way of a joint venture, illimity Bank and VEI Green II have set up a securitisation vehicle for distressed loans with underlying assets that produce electricity from renewable sources. This vehicle will invest up to €100m and operate in both the Italian primary and secondary energy markets. The partnership has commenced activities by carrying out its first operation on the Italian secondary energy market. This purchase involved a portfolio of loans that have photovoltaic systems as their underlying assets and a GBV of more than €14m, expire between 2027 and 2031 and are secured by the incentive tariff recognised by the Italian electricity service manager Gestore dei Servizi Elettrici. The aim of the transaction is to support the investments needed to return the systems to full productivity.

In other news…

Ares settles SEC charges
Ares Management has agreed to pay US$1m to settle SEC charges that it failed to implement and enforce policies and procedures reasonably designed to prevent the misuse of material nonpublic information. The SEC’s order finds that in 2016 Ares invested several hundred million dollars in a public company through a loan and equity investment that allowed Ares to appoint a senior employee to the company’s board. The order further finds that Ares’s compliance policies failed to account for the special circumstances presented by having an employee serve on the portfolio company’s board while that employee continued to participate in trading decisions regarding the portfolio company.

ARRC best practices
The Alternative Reference Rates Committee (ARRC) has published recommended best practices to assist market participants as they prepare for the cessation of US dollar Libor. The guidance suggests that new Libor cash products should include ARRC recommended, or substantially similar, fallback language as soon as possible and new use of USD Libor should stop. Further, third-party technology and operations vendors relevant to the transition should complete all necessary enhancements to support SOFR by the end of this year. Finally, for contracts specifying that a party will select a replacement rate at their discretion following a Libor transition event, the determining party should disclose their planned selection to relevant parties at least six months prior to the date that a replacement rate would become effective. Separately, Fannie Mae and Freddie Mac have launched new websites that provide key resources for lenders and investors as the GSEs transition away from Libor, as well as updates related to transitioning their credit risk transfer programmes and their CMOs.

CBL CMBS update
CBL Properties has become the first US mall operator since the start of the coronavirus pandemic to announce its intention to cooperate with lenders in foreclosure proceedings and/or to return keys on some malls in its portfolio. Three of these properties are in CMBS transactions rated by Fitch: the Park Plaza Mall in Little Rock, Arkansas; the Eastgate Mall in Cincinnati, Ohio; and Hickory Point in Forsyth, Illinois. The total Fitch-rated US CMBS conduit exposure to CBL-operated malls is 16 loans totalling US$1.06bn. As of the May 2020 remittance reporting, six of these loans (US$389m) were already with the special servicer and a forbearance request is currently being reviewed by the servicer for the US$63m Asheville Mall loan that remains with the master servicer.

North America
Mitchell Drucker has been named a partner in the Ares Credit Group, where he focuses on the group’s commercial finance platform. Drucker also serves as a member of the Ares Credit Group’s commercial finance investment committee. Prior to joining Ares, he was a partner at Garrison Investment Group, responsible for corporate finance investments in the firm's opportunity and direct lending funds group. Previously, he served in various capacities at the CIT Group. 

Onex Credit has hired Ronnie Jaber as head of structured products and Chad Valerio as portfolio manager for its opportunistic credit team. Jaber joins Onex Credit from The Carlyle Group, where he was md, co-head of structured credit and portfolio manager for global credit. Valerio joins from Oak Hill Advisors, where he was md and focused on stressed and distressed investments as portfolio manager. Jaber and Valerio will report to Stuart Kovensky and Jason New, co-ceos of Onex Credit. 

Upgrades for Grafton CRT
Moody's has taken positive rating actions on three tranches of an unexecuted unfunded CDS pertaining to Santander’s Grafton CLO 2016-1 capital relief trade. Together with affirming the tranche A notes at Aaa, the agency has upgraded the tranche B notes to Aaa from Aa3 and the tranche C notes to A3 from Baa3. The move reflects the significant amortisation of the portfolio since October 2019, leading to substantially increased credit enhancement for all the rated tranches. The April 2020 pool of performing assets has shrunk to £294.5m from £510.2m in October 2019 (albeit the portfolio was being managed to a replenishment level of £750m of performing par at that time). Moody’s notes that there is one reported credit event where the final loss has been determined.