Contents

RMBS

QM queue

New seasoned QM category could open door to increased MBS

On December 10, the Consumer Finance Protection Bureau (CFPB) issued the final rule for the criteria which define a Qualified Mortgage, and the introduction of an innovative seasoned loan category could provide a route for increased lending and greater MBS issuance, say market observers.

Under the new ruling, mortgages which do not initially meet the qualification benchmarks for QMs may become a QM if, over a 36-month period, they demonstrate the capacity for full and timely repayment. The loan must not have been delinquent for more than two 30-day periods and cannot have been delinquent for more than 60 days in the previous 36 months.

But there are exceptions. For example, if the loan is considered to have become delinquent due to a disaster or pandemic-related national emergency, then the borrower may be allowed an accommodation and his or her loan still considered a QM.

To be eligible to become a seasoned QM, a loan must be a first-lien, fixed-rate loan with no balloon payments and must meet certain other product restrictions. “This seasoned QM Final Rule will ensure access to responsible, affordable credit in the mortgage market through responsible innovation,” says CFPB director Kathleen Kraninger.

“The big unknown is the seasoned QM status. This is a new category which has been carved out and which has the potential for growth. If people have a lot of seasoned loans they are looking to get off their books through securitization, this gives them an avenue,” says Timothy Willis, an md and head of the governance and controls practice at RiskSpan, the data analysis and risk consultancy firm.

Moreover, the abolition of Appendix Q will perhaps increase ease of access to mortgage credit to a wider range of borrowers, thus increasing the pool of assets for the MBS market. The original ruling that defined QMs, as part of the Dodd-Frank legislation conceived in the aftermath of the financial crisis of 2008/2009, stipulated a wide range of detailed documentary evidence the creditor had to gather from the borrower before QM status was granted, known as Appendix Q.

This ruling tended to discriminate against those in self-employment or part of what has become called the gig economy, and also those who are asset rich but income poor. “Appendix Q was outdated and had lots of holes. It was stifling for many borrowers and prevented consideration of many types of stable income,” says Kris Kully, a partner in Mayer Brown’s Washington DC office.

Replacing Appendix Q is the new Regulation Z, which throws the onus for determination of capacity to repay upon the creditor. The latter must now “consider and verify” loan underwriting requirements. This means the borrower’s assets and expected income should be assessed and verified, but it is not nearly as prescriptive as the former ruling.

So, once again, this could open the door to increased lending. Additionally, MBS deals which incorporate only QM loans are exempt from risk retention rules. This would be an incentive to greater issuance. “There could be greater creativity and variability in the types of loan that are included in MBS deals which are exempt from risk retention rules,” suggests Kully.

One of the central platforms of the new rules is the removal of the so-called GSE Patch. This allowed all loans that were sold to Fannie Mae and Freddie Mac to be considered QM whether or not they satisfied the criteria for QM status that applied to private label bonds. From now on, all mortgages will considered alike, whether or not they are sold to a GSE or not. From June 30, all loans sold to the GSEs will be subject to the general QM rule.

“My sense is that if I were a regulator my concern with the Patch was that it basically outsourced responsibility for confirming what a QM is and just said ‘whatever Fannie and Freddie say, that’s good.’ The CFPB has got out from under that,” says Willis.

The great advantage of QM qualification is that it provides a shelter for the creditor against possible legal action by borrower for non-compliance. In the febrile post-crisis climate, with legal suits for unfair selling abounding, this was an important consideration for lenders.

Hand in hand with the elimination of the GSE Patch is the replacement of the 43% debt-to-income (DTI) ratio established in the 2010 rules and its replacement by a pricing criterion. Hitherto, a mortgage with an annual percentage rate (APR) of 225bp or less over the average prime offer rate (APOR) meets the threshold for QM status. This is the level beyond which loan performance deteriorates, according to ample statistical research conducted by the CFPB.

The substitution of the DTI ratio qualification with the pricing qualification addresses the concern that the removal of the GSE Patch would mean reduced availability of mortgage credit as the GSEs buy loans in which the DTIs are above 43%. Some of these loans may have an APR of less than 225bp over APOR and so will now qualify as QMs.

Of course, new White House administration might extend the GSE Patch beyond the slated June 30 expiration. The incoming government is perhaps less likely to want to reduce the role of the GSEs in the US mortgage market and create a level playing field - but this remains to be seen.

Simon Boughey

Capital Relief Trades

Canadian CRT in the wings

Canadian bank said to ready CRT

A Canadian bank, rumoured to be Scotia, is working on a new CRT trade, say well-placed market sources.

Timing is uncertain, and it is also not clear if the bank has gone out to investors yet.The asset base is believed to be SME or large corporate loans, but, again, this is surmise at the moment.

Scotia Bank has declined to comment.

There is a possibility that the borrower is CIBC or TD, but Scotia is thought the most likely candidate. Observers note that it has executed CRT trades referencing its Asian loan business in the past.

Bank of Montreal (BMO) has executed three CRT trades in the last 18 months, the most recent being a five year guarantee trade in July referencing US and Canadian senior secured and unsecured loans. But no other Canaian banks have been prominent in the market.

The smooth progress of these earlier trades from BMO indicates that approval from the Canadian regulator will be forthcoming as long as the bank can show that genuine risk transfer has been attained.

Simon Boughey

RMBS

Forbearance falters

Decline in loan removal from forbearance suggests large unknowns ahead

There has been a “troubling slowdown” in the rate of improvement of the number of mortgages in forbearance plans, says housing data provider Black Knight. This slowdown indicates the mortgage-backed sector enters a period of considerable uncertainty in less than three months, it adds.

There was a 3% drop in the first week of January, or 92,000, and was underpinned by the large number of quarterly forbearance plan expirations at the end of December.

However, this compares unfavourably to, the 18% drop seen in the first week of October as the first wave reached their six month expirations, or the 9% decline seen in early July during the first wave of quarterly expirations.

“While a 92,000 decline in the number of active forbearance plans is no doubt welcome, we're also seeing a strong pattern of slowing in the rate of improvement. This sets us up for increased risk and a significant unknown when these forbearance plans begin to reach their 12-month expiration points in less than 90 days,” Black Knight economist and director of market research Andy Walden told SCI.

Around 3.3% of GSE-backed loans and 9.3% of all FHA/VA loans are still in forbearance, while 5.2% of loans in private label securities are in forbearance.

This means, for example, that the GSEs must make estimated payments of around $1bn per month to cover principal and interest of those loans in forbearance which are part of MBS deals. Private label issuers must make estimated payments of $1.2bn per month.

Some 35% of loans in plans about to expire were removed from forbearance in the first week of January, compared to an average of 60% in the first week of the previous waves of quarterly expirations. This sharp decline in removal rate appears to be responsible for the slowing rate of improvement in forbearance, says Black Knight.

Last month marked the last significant wave of expirations before the first plans reach 12-month expirations at the end of March, and thus Black Knight believes it is unlikely that there will be only modest improvement in forbearance numbers between then and now.

Overall, as of January 5, there are 2.74m mortgages still in forbearance, or 5.2% of all mortgages. This represents $547bn in unpaid principal. This compares to around 4.7m mortgages that were in forbearance in mid-May.

Simon Boughey

RMBS

Libor linkage

UK RMBS transition risks highlighted

A number of UK RMBS issuers are initiating consent solicitation processes to amend notes and swap contracts from Libor to SONIA ahead of the cessation of Libor. Legacy transactions without active sponsors or those comprising US dollar-denominated notes are at the highest risk of disorderly transition, according to Fitch.

Fitch expects logistical challenges to arise this year in the transition away from Libor. In particular, the agency suggests that the limited resources available to parties such as trustees, legal counsels and noteholders may delay an orderly switch to SONIA.

Fitch has identified that there is no/low risk for 72% of deals where the transition is addressed or expected to be addressed. An immediate rating impact from the risk of disruption after the withdrawal of Libor is not expected, as most transactions have active sponsors.

In Fitch-rated UK RMBS, exposure to Libor relates significantly to sterling notes issued up to mid-2018 and US dollar notes. While mortgage contracts referencing Libor are the smallest category of exposure by balance, they are subject to long-term risks.

Transactions may also include Libor-linked assets, as well as basis and currency swaps referencing Libor.

Deals with weaker fall-back language in their documentation, such as pre-2012 issuances, are at significant risk because of inactive sponsors. This prevents the consent solicitation process from taking place. Pre-2012 issuance represents 17% of total outstanding notes by balance and 40% by transaction count, notes Fitch.

Meanwhile, delaying the cessation of US dollar Libor to mid-2023 poses an additional threat to an orderly transition (SCI 1 December 2020). In Fitch-rated UK RMBS, English law governs US dollar notes and the agency states that in order to replace Libor in contractual terms, a consensual amendment by the transaction parties would be required. Therefore, transition risk would be higher in this instance than if the note had been issued under US law.

Fitch reports that SONIA-linked notes represent half of its rated UK RMBS outstanding balance.

Jasleen Mann

RMBS

Strong opening

UK RMBS market update

The first public European securitisation of the year, dubbed Hops Hill 1, is expected to price today. Sponsored by UK Mortgages, the UK buy-to-let RMBS has received strong demand across the capital stack.  

The £332.6m deal is backed by 1,465 mortgage loans. Guidance for the senior notes was set at SONIA plus 100bp area, while guidance for the class B, C and D notes was set at plus 175bp area, plus 200bp area and plus 250bp area respectively.

One trader says: “Generally, the market has started on a pretty strong tone. For Hops Hill, the seniors were 3x covered and the mezz was 7x covered. This is evidence of a strong market.”

He adds: “I expect that this tone will continue for other deals that come to the market in the next couple of weeks. There is still room for spreads to tighten.”

The trader expects non-bank sponsors to be the main source of paper for the foreseeable future because they can fund cheaply at current levels. “There is not much interest for banks to issue at the moment. Some banks have been calling deals to bring assets back on-balance sheet,” he explains.

Indeed, another UK RMBS from a non-bank lender – Lendco - is expected to price next week. Dubbed Atlas Funding 2021-1, the £303.5m transaction is backed by a static pool of 731 BTL mortgages secured by properties located in England and Wales.

Lendco mandated BNP Paribas and HSBC as joint arrangers. BNP Paribas, HSBC and NatWest Markets are joint lead managers on the transaction.

“There is liquidity in the market. We may see challenger banks come back to the market to diversify their funding sources,” notes the trader.

Jasleen Mann

Structured Finance

Expanding footprint

Jordan Milman, global head of structured products at Hayfin, answers SCI's questions

Q: How and when did Hayfin become involved in the structured credit market?
A: Hayfin launched a structured credit offering in 2012 and since then has invested over €1.7bn through more than 200 transactions, generating gross returns of 11.9% for 2H20.

In June 2020, I joined the firm - along with John Hanisch - to lead the expansion of Hayfin's structured products mandate, which had most recently been concentrated in US and European CLOs and European commercial real estate investments. The firm had become increasingly active on the CLO new-issuance side in both Europe and the US, and for some time had been considering how it might expand its footprint in structured products.

The significant market dislocation resulting from Covid-19 catalysed our decision to broaden and diversify the structured products mandate at Hayfin, with a focus on long-term investing via closed-end vehicles. We would bring to the table a more diversified focus across asset classes, structures and investment themes.

Q: What are Hayfin’s key areas of focus at the moment?
A: We are seeking to build on Hayfin's legacy in a manner that is consistent with the principles that underpin Hayfin’s other credit strategies – that we can best serve our investors by employing a broad investment mandate and looking at the widest possible range of opportunities and structures therein. Our current focus is on private structured transactions backed by a diversified range of cash-flowing assets, including commercial real estate, residential real estate, consumer and related loans and corporate loans. We will also be opportunistically investing in public securities backed by similar collateral.

Q: To what extent has the structured products team been involved in the CLO market?
A: Structured credit is a highly interdisciplinary and global asset class, and there are clear synergies to growing our presence in parallel with the continued development of Hayfin’s other relevant strategies. That includes US CLOs, where we are able to collaborate on credit analysis with a team that has completed almost US$2bn in new issuance since 2018.

Q: What is your strategy for the other areas of the business?
A: Hayfin’s flagship private credit strategies leverage the firm’s local sourcing model to build relationships with sponsors and borrowers across Europe and gain access to investment opportunities not seen by other lenders, and 2020 was a record year in terms of private credit investment activity. There is a significant opportunity set of bespoke or directly originated private loans which sit at the intersection of our private credit and structured credit strategies, and we are able to collaborate with the private credit team on these.

Q: How do you differentiate yourself from your competitors?
A: Our team has extensive investment experience through a range of market cycles. Our most important differentiator is the specific avoidance of many of the investment strategies that proliferated over the past several years in a reach for yield and exacerbated the drawdowns related to Covid-19 in the spring. That is, an over-reliance upon financial leverage and a mismatch in liquidity between assets and liabilities within fund structures.

We are seeking to serve as an alternative to traditional structured credit funds by focusing on longer-term capital to invest in private structured transactions, as well as opportunistic investing and trading in public markets. This allows us to focus on fundamentally-driven outcomes and exit strategies, while limiting asset-liability mismatch and exposure to short-term price volatility.

Q: Which challenges has Hayfin overcome in the past year?
A: We have faced many of the same challenges as the rest of the world, with our offices across nine countries in three continents experiencing lockdowns, restrictions on movement and prolonged periods of remote working. Having joined Hayfin during the lockdown, we were onboarded remotely and have made multiple hires in the same capacity.

Essentially, we are building a business while working from home. It’s been a challenge, but we are proud of how the team has adapted and how efficiently we've been able to operate.

Q: Which challenges do you anticipate may arise in the coming months?
A: While consumer spending continues to improve, the labour market recovery appears to be cooling for now. The unemployment rate continues to fall, but so does the Labor Force Participation Rate and those who report their job losses as temporary. Moreover, the long-term unemployment rate has increased significantly, at roughly a third of those out of work.

On the bright side: industrial production, retail sales, housing and employment data have all surprised to the upside, though the spike in Covid cases may change these dynamics as we move through the winter months. 

In the US market, many of the emergency measures that supported borrowers through the spring and the summer have been phased out. These fiscal stimulus, extraordinary unemployment benefits and forbearance programmes kept many borrowers underlying structured products afloat; it remains to be seen how they will perform with these measures pared back and if permanent scarring is prevalent in the economy.

A new administration and a Covid vaccine have taken some risks off the table, so we feel better about the credit cycle than we did in Q3. But the shift in the balance of power in the Senate and the prospect of a unified government could have meaningful effects on borrowers across virtually all structured products sectors, in both directions – such as via foreclosure and eviction moratoriums, student loan forgiveness, CRE borrower relief or capital gains taxes.

While most risk assets still possess negative convexity to an underperforming recovery, we feel more confident in our upside scenarios. This particularly applies with respect to highly distressed assumptions around Covid in the CMBS, CLO and ABS sectors, especially relative to pricing assumptions underlying broader markets. 

Q: Which opportunities are you expecting and how do you intend to capitalise on them?
A: Public markets have presented distressed investment opportunities, particularly in CMBS and CLOs, and the private opportunity set has proven highly robust. Commercial and residential real estate lending, credit risk transfer and consumer finance opportunities have allowed us to tailor our exposure to specific market subsectors with stronger economic tailwinds, while avoiding technical factors that have driven market pricing beyond where we see attractive risk-adjusted returns in many securitised asset classes.

Our focus continues to be on private structured transactions, as well as relative value trades on the margins of well-trafficked markets, with the benefit of locked-up capital allowing us to focus on fundamentally-driven investment outcomes.

Jasleen Mann

Structured Finance

Landmark Pan-Asian ILS launched

Sector developments and company hires

Landmark Pan-Asian ILS launched
MS Amlin Underwriting has launched Phoenix 1 Re, the first locally issued ILS to provide capacity to a local cedant, solely focused on the Pan-Asia region. The special purpose reinsurance vehicle (SPRV) is domiciled in Singapore and provides US$42m of collateralised capacity to support MS Amlin Syndicate 2001’s Asia reinsurance portfolio through its Singapore-based underwriting platform.
Phoenix 1 Re has a unique structure that accommodates different policy renewal and inception dates within its underlying portfolio of Asian risks, thereby making it attractive to a wider pool of catastrophe bond investors. The portfolio has exposure to over 10 territories and specifically excludes key peak perils. Approximately half of the capacity was supported by Asia-based investors or fund managers.

In other news…

Acquisitions
Onex Corporation has acquired Falcon Investment Advisors, with the aim of expanding its credit platform and solidifying its market position in tradeable, opportunistic and private credit. Falcon provides private credit financing solutions and has US$3.8bn of assets under management, as of 30 September 2020. It employs an opportunistic approach to mezzanine and other direct lending investments for US middle market companies. With this transaction, Onex Credit will have over US$16bn of alternative credit assets under management.
Falcon’s senior management team and employees are all joining the new platform within Onex Credit, called ‘Onex Falcon’. Current members of the Falcon investment team will continue to be responsible for the investments of existing and future funds, with the support of the Onex Credit platform and team.
Falcon founder and managing partner Sandeep Alva and Onex Credit md Blair Fleming will be co-business heads, reporting to Jason New, co-ceo of Onex Credit. Together, they will drive execution and strategy for the combined team.

US Bank is set to purchase the debt servicing and securities custody services client portfolio of MUFG Union Bank. Under the terms of the agreement, US Bank will acquire approximately 600 client relationships and US$320bn in assets under custody and administration. The deal is expected to close in 1Q21, subject to regulatory approval and satisfaction of customary closing conditions.

Call to transition legacy ABS
AFME has called on market participants to actively transition as many transactions as possible to identify and reduce the stock of legacy securitisations well in advance of the cessation of Libor at end-2021. The association urges issuers and investors to contact each other via established channels, in order to identify and implement the required practical next steps for the affected bonds.
While draft legislation has been laid before UK Parliament to assist in the resolution of “tough legacy” transactions, the UK authorities have made clear that parties relying on regulatory action will not have control over the economic terms of that action. The FCA has further pointed out that although it may be given the powers to facilitate the development of a ‘synthetic’ Libor, it will not be bound to use such powers.

CMBS ARAs reviewed
KBRA recently reviewed appraisal reduction amounts (ARAs) across the US CMBS 2.0 conduit universe and found that 409 ARAs were effectuated year-to-date through November 2020, versus 111 in full-year 2019. Excluding automatic ARAs, more than 80% of realised losses exceeded the ARAs initially effectuated.
Of the US$3.1bn of ARAs outstanding across 442 loans, more than three-quarters by principal balance are collateralised by retail (54%) and lodging (24%) assets, according to the KBRA study. By state, New York and Texas have the two largest ARA exposures - at US$566.7m and US$478m respectively - and account for about one-third of all outstanding ARAs. The 10 deals with the highest ARA exposures have cumulative ARA amounts ranging from 6.7% to 16.8% of their outstanding principal balance.

EMEA
The European Leveraged Finance Association (ELFA) has appointed Sabrina Fox as its first ceo. Fox will establish and maintain relationships with strategic partners, engage with regulatory bodies and work with the ELFA’s members to take a leading role on industry issues and advocacy positions in the UK and the EU. Prior to her appointment as ceo, Fox was executive adviser at the ELFA for two years. She joined the ELFA from Covenant Review, where she was head of European high yield research.

Juan Carlos Martorell is now responsible for origination, structuring and distribution of securitisations and risk transfer at Munich Re. He joins Munich Re from Mizuho International, where he was md and co-head of structured products solutions. Prior to that, Martorell worked at Lazard, Amias Berman, ABN AMRO and S&P.

Onex Credit has recruited Conor Daly to lead its European CLO platform, beginning in April 2021. Daly joins Onex Credit from BlackRock, where he was a portfolio manager in the European fundamental credit team. He was a key member of the team that established BlackRock’s European CLO and leveraged loan business.

Harry Noutsos has joined PCS as md within its outreach team. Noutsos was previously global head of ABS at ING and has also worked at Bank of America, Credit Suisse and Santander in securitisation roles.

Rabobank has promoted Serdar Özdemir from executive director to head of structured asset distribution - portfolio management. Based in Utrecht, he is responsible for balance sheet optimisation at the bank via whole loan sales and securitisation. Özdemir joined Rabobank in 2014 as a senior securitisation structurer, having previously worked at RBS and ABN AMRO.

French SME CRT inked
The EIB Group and BNP Paribas have executed a synthetic securitisation to support French SMEs and mid-caps hit by the coronavirus fallout. Supported by the European Fund for Strategic Investments (EFSI), the operation consists of an EIB Group guarantee on an existing portfolio of loans to SMEs and mid-caps. This credit protection enables BNP Paribas to free up part of the regulatory capital allocated to this portfolio and deploy €515m of new loans to SMEs and mid-caps in France over the next two years.
The financing may take the form of bank loans or leasing transactions. The beneficiaries of this financing will have access to favourable financial terms via an onlending deal granted by the EIB.

Global
Cadwalader has promoted seven attorneys to special counsel, including Alexander Collins and Kevin Sholette respectively of the firm’s capital markets and real estate practices. Based in London, Collins focuses on structured finance, with an emphasis on CLOs. Sholette is based in Charlotte and primarily represents financial institutions in connection with the origination of single- and multi-asset complex real estate loans of all balance sizes secured by all asset classes.

HERO ABS ‘insulated’ from Renovate bankruptcy
PACE originator Renovate America last month filed for Chapter 11 bankruptcy, as a result of coronavirus economic disruption, underwriting legislation passed in California in 2018 and lawsuits filed against the company. These regulatory and legal issues include the California legislation implementing strict standards focused on ability-to-pay, making new originations more costly, and a putative class action lawsuit against Renovate.
Renovate has sponsored 13 PACE securitisations under the HERO Funding platform. But KBRA notes that the transactions are largely insulated from the financial performance of Renovate, as the company only served as the programme administrator, has limited interaction with the underlying obligors and has little control over collateral performance. The servicing of the PACE assessments is performed by David Taussig & Associates, which serves as the assessment administrator.
Despite Covid-19 and the challenges faced by Renovate, the PACE ABS rated by KBRA have continued to perform and homeowner delinquency levels have remained below 3%.
Meanwhile, Finance of America Mortgage (FAM) has placed a stalking horse bid for Renovate’s Benji business, which provides home improvement financing solutions.

North America
Simon Mullaly has joined Guggenheim Securities as md, to expand its fixed income credit trading capabilities. Mullaly was previously md and head of the European private credit trading group at Imperial Capital. Prior to that, he was the founder and ceo of Yorvik Partners, a London-based esoteric credit products brokerage that was acquired by Sterne Agee (SCI 11 October 2013).

SR application submitted
European DataWarehouse (EDW) has submitted an application to become a securitisation repository in the UK registered and supervised by the FCA. The move follows its establishment of a UK subsidiary and office. EDW has collected loan-level data and relevant documentation for over 1,600 transactions since inception.

Structured Finance

Ocwen, CFPB mediation unresolved

Sector developments and company hires

Ocwen, CFPB mediation unresolved
Ocwen Financial Corporation has issued a statement expressing its disappointment that settlement discussions with the CFPB have not been resolved (SCI 21 April 2017). The move is in response to the mediator’s notice that the company’s court-ordered mediation with the bureau has concluded, after the parties were unable to reach a settlement.

The company says it engaged with the CFPB in “good faith” throughout the course of mediation and “took all actions in an attempt to reach a fair and reasonable resolution”. However, it adds that it “remains steadfast” in its belief that the CFPB’s claims are unsubstantiated and the bureau’s settlement demands do not reflect the merits of the case.

The company increased its legal and regulatory accrual related to the CFPB lawsuit by US$13.1m in 4Q20, resulting from its efforts to resolve the matter in mediation.

In other news…

Acquisition
dv01 has acquired Pragmic Technologies, an early-stage company focused on the data infrastructure of the agency MBS market. Pragmic Technologies’ Charlie Oshman and Memo Sanchez, co-founders of commercial real estate data analytics company Reonomy, will join dv01 to help expand its efforts in agency MBS and ESG.  

With the Pragmic Technologies acquisition, dv01 intends to develop a novel data infrastructure that resolves the traditionally slow and opaque reporting processes within the agency MBS sector. Agency MBS performance is typically reported on a monthly data update cycle, but dv01 plans to be the first to provide investors with granular, intra-month performance insights as result of the acquisition.

The company also intends to combine its understanding of loan-level data within securitisation with external data sources and proprietary analytics to work with partners to provide ESG ratings for structured products.

To support this growth and technological advancements, dv01 has successfully closed a US$6m series B3 financing round led by Pivot Investment Partners and joined by new strategic investor, AGNC Ventures.

EMEA
Kartesia has created a full-time CSR & ESG position, to be filled by Coralie De Maesschalck, who has been head of portfolio and ESG at the firm since 2015. She will be responsible for CSR initiatives at corporate level, ESG criteria at portfolio level and internal procedures. Basile Gerber will take over leading the portfolio and will manage the team as head of portfolio. He will deliver quarterly reporting to investors, as well as monitor the portfolio and supervise performance analysis and fund financings.

Tikehau Capital has hired Laura Scolan as head of France and coo within its private debt strategy. Scolan joins from Messier Maris & Associés, where she was a partner and co-head of its debt advisory business, having joined the firm in 2013 as a director. At Tikehau, she will be responsible for the group’s private debt investment activities in France and the operational management of private debt activity. Scolan will report to Cécile Mayer-Lévi, head of private debt at the firm.

HRR pass-throughs issued
Argentic Real Estate Finance has transferred its horizontal risk retention interests in 13 previously issued US CMBS into 14 newly formed trusts that are majority-owned affiliates. The trusts have, in turn, issued non-pooled pass-through certificates rated triple-B or triple-B minus by Fitch.

The underlying transactions were issued between 2017-2019. Argentic intends to offer a non-controlling interest of up to 80% in the MOAs to third-party investors in the future.

Name-change for CLO manager
DFG Investment Advisers has changed its name to Vibrant Capital Partners, unifying the firm with its CLO business and several of its investment vehicles, which have operated under the Vibrant brand since 2012. The firm says that its focus on technology, transparency and risk management remain core to its business.

Online lender to go public
SoFi is set to go public by merging with a SPAC, Social Capital Hedosophia Holdings Corp V, which is run by Social Capital founder Chamath Palihapitiya. The deal will value SoFi at US$8.65bn and is expected to provide up to US$2.4bn in cash proceeds. PeerIQ reports that the firm’s strategy is to target three business segments - lending, a technology platform (Galileo) and financial services.

Strategic investment
Nassau has received an initial strategic investment of US$100m from Wilton Reassurance Company and Stone Point Credit. The investment was made through the issuance of a new series of non-cumulative perpetual preferred equity. Nassau will use the new capital to execute on growth plans across its insurance and asset management businesses and to support strategic acquisitions. The firm was founded in 2015 with an initial capital commitment along with subsequent growth capital provided by Golden Gate Capital, which remains a majority controlling shareholder.

Triaxx CDO claims process opened
RCB Fund Services, the distribution agent for the ICP Asset Management Fair Fund, has opened the claims process for the fund. The ICP Fair Fund was established by the US SEC to distribute more than US$22m in disgorgement, prejudgment interest and civil penalties collected in SEC versus ICP Asset Management.

The ICP Fair Fund will be distributed to investors harmed by fraudulent practices and misrepresentations made in connection with the Triaxx CDOs (SCI 17 August 2012). Claims will be considered by the distribution agent, the SEC staff and the economic expert retained by the SEC, and used to propose to the Court a plan of distribution to compensate investors. Claim submissions must be made by 12 March.

Structured Finance

Lloyd's ILS platform unveiled

Sector developments and company hires

Lloyd’s ILS platform unveiled
Lloyd's has established London Bridge Risk PCC, the first UK ILS structure to be approved by the PRA for use for multiple, market-wide transactions for Lloyd's members. Clifford Chance worked with Lloyd's and the regulators to devise a structure and set of market standard template documentation with flexibility to accommodate a range of individual investment models and objectives. This arrangement is expected to facilitate capital-efficient investment into Lloyd's, while reducing the frictional costs and time usually associated with a standalone ILS vehicle.

In other news…

Continuously offered BDC debuts
Blackstone Private Credit Fund (BCRED) - Blackstone’s non-listed BDC - has broken escrow with approximately US$814m in net proceeds for its continuous public offering. With leverage, BCRED may have approximately US$1.8bn of investable capital. BCRED aims to provide income-focused individual investors access to private credit in a continuously offered fund structure.

Development finance firm formed
A pair of property finance executives, backed by funds managed by Oaktree Capital Management, have launched Silbury Finance - a platform providing bespoke senior development finance solutions for the structurally undersupplied UK residential, retirement and student accomodation sectors. The firm was founded by Matthew Pritchard, formerly head of European real estate debt at Man Group, and Gavin Eustace, formerly head of residential development at Octopus Real Estate. The platform will underwrite loans typically in the £10m-£150m range, with an LTV between 60% and 70%, and is targeting £500m of lending in 2021 and up to £3bn of lending over the next six years.

EMEA
Intermediate Capital Group has appointed Philippe Arbour as md, Senior Debt Partners, which is one of its flagship strategies. He joins ICG from Palamon Capital Partners, where he was a partner since 2019. Arbour will help develop sponsor coverage, origination and execution in the UK senior direct lending market.

Scope has appointed Guillaume Jolivet as coo, responsible for the rating agency’s analytical activities and governance, including compliance and internal audit for Scope’s subsidiaries. His focus is on further broadening and deepening Scope’s analytical output and rating coverage across all of Europe, as the company internationalises its business. Jolivet joins Florian Schoeller, ceo, and Christopher Hoffmann, cfo, on Scope Group’s executive board.
Jolivet was appointed head of Scope’s credit rating unit in 2019 and launched its ESG ratings unit in 2020 together with Schoeller. Jolivet joined Scope in 2013 to create and develop the agency’s structured finance rating activity.

Global
Reed Smith has promoted 31 associates and counsel to partner, including two with structured finance experience. In the firm’s Chicago office, Daniel Buoniconti concentrates his energy & natural resources practice in structured finance, trade finance, receivables finance, inventory finance and commercial lending. Meanwhile, in its London office, Andrzej Janiszewski is a member of the financial industry group, where he handles structured finance and impact finance transactions.

Impact investment firm founded
Damien Dwin has launched Lafayette Square, an impact-driven minority owned investment platform. The firm aims to confront critical societal challenges with capital and services in three core areas - housing, jobs and financial inclusion.

Sharing in this vision, Morgan Stanley has provided US$100m of financing to launch Lafayette Square. Employees own over 90% of the firm’s equity, with other equity holders including the Capricorn Investment Group's Sustainable Investors Fund and Schusterman Family Investments, both of which will maintain seats on the Lafayette Square board.

Prior to founding Lafayette Square, Dwin served as co-founder and co-ceo of Brightwood Capital Advisors from 2010 to October 2020. Before that, he was head of North American special opportunities at Credit Suisse and a trader at Goldman Sachs.

Lafayette Square launches with a seasoned team of 17 professionals with an average 15 years of experience in financial services. The team includes chief risk officer Phil Daniele, chief of staff Doug Ebanks, head of investor relations Caitlin Mixter, mds Ryan Ochs and Joe Johnson, director Casey Woo and vp Mary Ann Raftery. The firm expects to grow to approximately 65 employees by 2022.

North America
Michael Zampetti, md, has joined Greystone’s commercial finance team in New York. He was previously at CIBC for seven years, focusing on balance sheet and CMBS lending. Zampetti will focus on loan production across an array of platforms and on expanding Greystone’s lending activities to a broader scope of commercial asset classes.

Home Point Capital has appointed Andrew Bon Salle as its chairman. Bon Salle joins the firm following a nearly 30-year tenure at Fannie Mae, where he most recently served as evp of its single-family business. During his time at Fannie Mae, he guided the company's credit risk management and pricing strategies, and managed lender execution services, such as MBS, structured product sales and trading, whole loan acquisition and conduit activities, and early funding transactions.

Natixis has named Emmanuel Issanchou head of global markets Americas and global head of credit markets. His long history with the firm includes past roles serving as head of EMEA structured credit & solutions and global head of structured credit & solutions and credit trading.

Pollen Street has recruited Daniel Khouri to lead its team in New York, advancing the firm’s credit strategy to develop partnerships with best-in-class specialists in the non-bank lending sector to provide capital and strategic insight. Prior to joining Pollen Street, Khouri served for six years as co-head of private credit at Colchis Capital Management, two years as a principal at Atalaya Capital Management and three years as a vp at TTM Capital. He began his career on the sell-side at DB Zwirn and Citi.

Former Magnetar Capital fixed income strategist Tom Rutledge has co-founded a rideshare firm called Wapanda. He joined Magnetar in 2008 and before that worked at firms including Deutsche Bank, JPMorgan and Merrill Lynch.

Structured Finance

illimity inks NPL ABS duo

Sector developments and company hires

illimity inks NPL ABS duo
illimity Bank has finalised two non-performing loan transactions, including the sale to Phinance Partners and SOREC involving a €129m GBV portfolio related to around 4,500 debtors. The portfolio consists of unsecured loans related to granular mainly retail exposures that were acquired by illimity during 2019 as part of an investment transaction in a large portfolio on the primary market.

Phinance Partners and SOREC acted respectively as arranger and special servicer, and jointly as advisors of LEX, the securitisation vehicle that purchased the loans from illimity. The notes issued by LEX were purchased by institutional and professional investors.

The second transaction involves the issuance of notes by a newly established securitisation vehicle constituted for the purchase of distressed credits with a gross nominal value of €31m. The portfolio comprises NPLs and unlikely-to-pay loans, granted to two companies belonging to the same economic group and secured by properties with various intended uses - including accommodation, commercial and office - located in Sicily.

illimity underwrote the senior notes issued by the vehicle, while a professional investor underwrote the junior notes.

In other news…

EMEA
Luxembourg-based MC Invest has added Daniel Clarke and Tom Sterling as mds, as well as John Aldershot, Jamie Stratton and Peter Northwood as directors in its MBS and rates division. The new recruits will focus on institutional account coverage in mortgage and securitised product sales.

Clarke most recently served as a director of institutional sales at AD Securities and prior to that was the director of structured product sales at Credit Suisse. He previously worked as an associate in the taxable fixed income department at Prudential Securities and as an associate at CIBC Oppenheimer.

Sterling most recently served as an svp of institutional sales at Durrell Partners and prior to that was an associate in the securitised products sales division at JPMorgan London. He was previously an avp of regional institutional sales - mortgages at UBS, avp of taxable fixed income sales at ADC Group and an analyst in the investment management asset group at Prudential Financial.

GSE PSPAs amended
The FHFA and the US Treasury have amended the GSE preferred stock purchase agreements (PSPAs) to allow Fannie Mae and Freddie Mac to continue to retain earnings until they satisfy the requirements of the 2020 Enterprise capital rule. Additionally, Treasury has agreed that the enterprises can raise private capital and exit conservatorship once certain conditions are met. To facilitate enterprise equity offerings, the department has committed to work to restructure its investment in each GSE. ​

Minority interest acquired
TIG Advisors has acquired a minority revenue share interest in Arkkan Capital, a Hong Kong-based alternative asset manager with approximately US$1bn of assets under management, from a fund managed by a Blackstone advisor. The fund, which seeded the firm, remains an investor in Arkkan’s fund.

Founded in 2013 by Jason Brown, Arkkan focuses on credit and special situations investments across Asia Pacific. Brown will continue to lead the firm as cio and retain control over Arkkan’s day-to-day operations and investment processes. As a growth-oriented partner, TIG will work collaboratively with Arkkan, focusing primarily on marketing and business development.

North America
Elementum Advisors has hired Todor Todorov as vp, business development & investor relations. Based in New York, he will be responsible for the firm’s management of client relationships and investor education, and will also focus on product and strategy development. Todorov joins Elementum from Willis Towers Watson, where he was a director in the investment manager research team and led ILS strategies research.