Contents

Capital Relief Trades

Positive prospects

Margin loan CRTs on the agenda

Credit Suisse is expected to close a capital relief trade referencing Asian margin loans this quarter (SCI 15 March), with further such transactions anticipated amid rising current and future IPO issuance. Although senior management and regulators remain to be convinced, synthetic securitisations appear firmly on the agenda as a tool for managing the capital impact of an increase in margin loan origination.   

Margin loans are collateralised by shares and other tradable securities, and are more prevalent in Asia. The most active jurisdictions are Hong Kong and Singapore, given their mature stock markets. The banks that are active in the space tend to be the ones with large wealth management and private banking arms.

According to James Pedley, partner at Simmons & Simmons: ‘’There is an expectation that origination of margin loans will pick up, pending big IPOs in Hong Kong and Singapore. So, synthetics will be relevant here, as banks try and manage the increased credit risk relating to the pick-up in loan origination.’’

In fact, PwC estimates that the Asia Pacific accounted for 52% of all global IPO transactions in 2020, with 36% in the Americas. Nevertheless, the Americas represented 57% of global IPO proceeds.

The key drivers of IPO activity in 2020 were technology, e-commerce, healthcare IPOs and the resurgence of SPAC activity in the US. Yet Singapore is seeking to become Asia’s SPAC hub, following the initiation of a consultation for its proposed regulatory framework on the asset class by the country’s stock exchange. Additionally, the number of financial sponsor IPOs more than doubled in 2020, compared to the previous year.

However, in APAC, banks typically use more traditional Basel tools - such as guarantees - to hedge the risk of losses in full, as opposed to synthetics that only cover a circa 10% first loss. “That said, synthetics are far more efficient from a capital perspective,’’ Pedley concludes. ‘’Furthermore, an increase in margin loan origination will push risk limits and appetite within banks. So, you still must convince senior management within them, but synthetics are on the agenda with both originators and regulators as a tool for managing the capital impact of this increased margin loan origination.’’

Stelios Papadopoulos

ABS

Inclusive approach

ABCP to facilitate sustainable asset transition

An inclusive approach to transitioning assets is considered crucial to developing a functioning ESG securitisation market. In this context, ABCP is expected to play an active role in financing the move towards a low-carbon economy.

A recent AFME discussion paper - entitled ‘ESG Disclosure and Diligence Practices for the European Securitisation Market’ – notes that two elements are important for the ESG securitisation market to flourish: a sufficiently large pool of assets available for ESG securitisation; and a common ESG standard for disclosure and due diligence. Regarding the first element, as originators transition to more sustainable business models, pools of suitable assets should increase organically over time. Indeed, many transitioning assets satisfy the ‘green’ criteria under the EU Taxonomy, which envisages that a project or economic activity can be green where the underlying activity results in a significant improvement in performance.

“There is a new wave of sustainability regulations coming towards the fixed income market and our members are asking for guidance on how to approach them,” says Anna Bak, associate director in the securitisation division at AFME. “The key point that came up when compiling the discussion paper was how to transition to a more sustainable market. There currently aren’t enough green or sustainable assets to satisfy investor demand; therefore, incorporating assets that are transitioning from brown to green is important.”

At the same time, ABCP volumes are growing significantly – especially in trade receivables – and this type of financing typically focuses on the real economy. As such, Bak notes that ABCP can facilitate corporate and SME efforts to make their business models more sustainable.

“It’s vital post-coronavirus for corporates and SMEs to be able to access the capital markets. Not all of their activities will immediately be green, but securitising their trade receivables via ABCP enables them to use the funding to develop sustainable business models. Such short-term funding can be especially helpful, given the funds are received quickly,” she explains.

Richard Sinclair, global co-head of conduit funding and management at Credit Agricole CIB, agrees that ABCP could conceptually play a role in helping companies transition to more sustainable business models. “The rewards are starting to appear: some investors are ready to offer cost of funds reductions in connection with sustainable investments. Given that ABCP is smaller in size and more flexible than ABS, green ABCP is a laboratory for the rest of the securitisation market. I expect more investment to be allocated to green ABS eventually, but in the meantime, ABCP can play an active and ongoing role in financing the transition to a low-carbon economy.”

When assessing ESG factors for securitisations, investors typically consider both the securitisation portfolio and the key transaction counterparties. As such, how the performance of the assets aligns to environmental and/or social objectives and how these are underpinned by good governance are the most relevant factors to consider when evaluating an ESG securitisation.

Overall, Bak suggests that any transitional ESG framework should focus on sustainable securitisation, while striking a balance between being too prescriptive regarding eligible assets and discouraging greenwashing. As for ESG disclosures and due diligence, the already very high standards required under the EU Securitisation Regulation provide a strong starting base from which to develop - where necessary - further relevant ESG data.

“Investors can already access all the information they need, so any new sustainable disclosures should be kept to a minimum. Such disclosures need to be complimentary to the requirements that already exist, rather than creating a whole new framework, otherwise the securitisation market will fragment even further,” Bak notes.

Green ABCP gathers pace
The AFME discussion paper cites Credit Agricole CIB’s debut green ABCP issuance via the La Fayette Asset Securitisation conduit (SCI 7 July 2020) as an example of the growing supply of ESG securitisation bonds. The issuance marked the start of a movement for the bank, according to Sinclair.

“We’re capitalising on Credit Agricole CIB’s sustainable banking activities, being a leader in green bond issuance. The sustainable banking team added a green ABCP annex to the bank’s green bond framework, which received a second-party opinion from ESG assessment provider Vigeo Eiris,” he explains.

The opinion confirms that, in Vigeo Eiris’ view, Credit Agricole CIB’s Green ABCP Programs Annex is aligned with the four core components of ICMA’s Green Bond Principles 2018. The opinion provides the highest level of assurance regarding the sponsor’s commitments and on the contribution of the ABCP to sustainability.

The bank has issued further green ABCP since last summer through its Atlantic and LMA conduits, although the outstandings remain modest for the time being, at less than US$100m in the US and €70m in Europe. “However, volumes are growing due to the significant interest from investors,” Sinclair notes. “We’re struggling to meet demand at present – investors are actually approaching us for more green ABCP. They are, in turn, being pushed by their own investors.”

Having begun with hybrid and electric vehicles in the auto loans and leases segment with the La Fayette issuance, Credit Agricole CIB has diversified into other sustainable assets, including trade receivables derived from renewable energy and waste and water management companies. For the time being, the bank is focused on use of proceeds.

“Many asset categories are included under the green bond framework – renewables, green buildings, energy efficiency, waste and water management and clean transportation. We select receivables from pure player debtors - for example, manufacturers of wind turbines – or by sellers of assets whose activity is green, such as train operators. It is a question of discussing with clients what their projects are and how we can help, as well as convincing them to identify more green assets in their portfolios,” Sinclair explains.

Credit Agricole CIB screens the portfolio and monitors it through investor reporting. The bank has developed puttable and callable technology to reimburse the CP, should the amount of green assets in the conduit drop below a certain threshold.

Corinne Smith

ABS

Collection boost?

NPL sales increase pending amid uncertain timing

European non-performing loan sales are expected to receive a boost this year, due to higher unemployment and the impact of reduced government support measures on corporates. However, the timing remains uncertain and large-scale sales could be delayed to 2022 in a downside scenario.

According to Fitch, following the initial impact of the pandemic in 2Q20 and to some extent 3Q20, the collection performance of Europe-focused debt collectors improved but any recovery remains uneven and fragile. In general, more geographically diversified debt collectors with limited reliance on judicial work-out processes performed better than peers with material exposure to secured NPLs and/or southern European markets, which have been more affected by stringent coronavirus-related lockdown measures.

Although many jurisdictions re-imposed lockdown measures in late 2020 or 1Q21, Fitch does not expect these restrictions to have a material negative impact on collection performance in 1Q21. However, any further capacity constraints in judicial processes could significantly affect collection expectations for secured NPLs, as could a material uptick in unemployment rates following the phasing-out of support measures.

Overall, the rating agency expects increased NPL sales in 2H21. “We expect NPLs to increase materially in 2021 as a result of higher unemployment and the impact from reduced government support measures on corporates. Given the generally front-loaded shape of estimated remaining collection curves, debt purchasers will have to resume substantial portfolio purchases in 2H21 to protect current EBITDA levels.’’

Nevertheless, Fitch qualifies that the timing is ultimately uncertain and large-scale sales could be delayed to 2022 in a downside scenario. Yet the benefit of the uncertainty is improved portfolio pricing.

Fitch concludes: ‘’Following several years of severe pricing pressure - particularly in the established European markets in 2018 and 2019 - we expect an increase in supply and, to a lesser extent, increased uncertainty about post-Covid-19 portfolio behaviour to lead to improved portfolio pricing, supporting a higher internal rate of returns. This trend will likely be more pronounced for unsecured consumer portfolios, where price competition has been strong.’’

Stelios Papadopoulos

Capital Relief Trades

Risk transfer round-up - 6 April

CRT sector developments and deal news

Societe Generale is believed to have finalised a synthetic securitisation backed by capital call facilities. The transaction follows a boost in capital call issuance last year, with more such deals expected this year. Indeed, BNP Paribas is allegedly set to complete a capital call transaction this quarter.   

Capital Relief Trades

Risk transfer round-up - 7 April

CRT sector developments and deal news

Standard Chartered is expected to price a corporate capital relief trade from the Chakra programme this week. The lender’s last corporate deal from the programme was finalised in November 2019 (see SCI’s capital relief trades database).   

Structured Finance

Recovery package fast-tracked

Sector developments and company hires

Recovery package fast-tracked
The Securitisation Capital Markets Recovery Package measures have been published in the EU Official Journal, meaning that the STS synthetics framework and improved non-performing loan ABS rules will come into force on Friday. The amendments are being fast-tracked at an unprecedented pace, coming into force only a fortnight after the European Parliament voted on them (SCI 26 March). AFME, for one, has welcomed the publication of the new securitisation rules in the OJ as an important step towards providing more lending to the real economy and to accelerate the region’s Covid-19 recovery.

In other news…

CFPB SLABS lawsuit dismissed
Judge Maryellen Noreika of the US District Court for the District of Delaware has dismissed a lawsuit brought by the CFPB against National Collegiate Master Student Loan Trusts, finding that the suit was constitutionally defective due to the CFPB’s untimely attempt to ratify the prosecution of the litigation in the wake of the Supreme Court’s decision in the ‘Seila Law LLC v. Consumer Financial Protection Bureau’ case.

A recent Cadwalader memo notes that the case is of particular relevance to the structured finance industry because the litigants had disputed over the question of whether the ABS trusts in the litigation are ‘covered persons’ liable under the Consumer Financial Protection Act, despite their status as passive securitisation trust entities. The securitisation industry operates on the premise that agreements governing securitisations provide that transaction parties are responsible for their own malfeasance and, barring special circumstances, will not be held accountable for the misconduct of other parties to the transaction. A decision holding that passive securitisation entities are ‘covered persons’ under the CFPA - and thus potentially responsible for the actions of their third-party service providers - would undermine the certainty of contract terms that underpins the structured finance industry, according to Cadwalader. 

Internalisation agreement inked
Colony Capital subsidiary CLNC Manager has signed definitive agreements with Colony Credit Real Estate to consensually axe their management agreement. This transaction is a result of CLNC’s previously announced strategic alternative review process and is consistent with Colony Capital’s ongoing digital transformation and strategic plan.

Colony Capital will continue to own approximately 48 million shares, representing 36.1% of the outstanding shares of CLNC, following the closing of this transaction. In connection with this internalisation, Colony Capital will not seek re-election for its affiliated directors on CLNC’s board when their terms expire at CLNC’s upcoming annual shareholders meeting in May 2021. The company has also agreed with CLNC to enter into a new stockholders agreement, which will become effective upon closing of the internalisation transaction.

The transaction, which is subject to certain customary closing conditions, is expected to close in 2Q21. At that time, the management agreement between Colony Capital and CLNC will be terminated.

North America
Peter Hancock has joined the board of ILS marketplace Ledger Investing. Hancock previously served as president and ceo of AIG. Before that, he was JPMorgan’s cfo and chief risk officer, after 20 years leading fixed income and derivatives businesses. He also served as vice chairman at KeyBank.

Ira Reid has joined McLaughlin & Stern as special counsel to the bankruptcy and restructuring group. Reid was formerly a partner at Baker & McKenzie and prior to that, practiced at LeBouef, Lamb, Greene & MacRae. His expertise lies in the bankruptcy implications and resolution of complex structured finance transactions, repurchase agreements and credit derivatives, including swap transactions.

The firm has also promoted partner Steven Newburgh to the position of chair of its bankruptcy and restructuring group. The practice group's former chair Paul Silverman has become special counsel to the firm, but will continue to be an active member of the group. 

Morgan Lewis has strengthened its structured transactions practice with the addition of partners Steven Becker and Alex Velinsky, who will be resident in New York and Washington, DC respectively and arrive from Hunton Andrews Kurth. Becker focuses on residential and commercial mortgage-related collateral and advises clients on deals involving a variety of loan asset classes, including flow purchase programmes to online lending platforms. Velinsky handles financing transactions for borrowers, lenders and servicers involving residential and commercial mortgage loans, RMBS, CMBS, servicing advances and servicing rights.

Stuart Kovensky has stepped down as Onex Credit’s co-ceo and cio, but will remain on the firm’s board. Co-ceo Jason New has been named head of Onex Credit as a result. Prior to joining Onex Credit, New was a senior md at Blackstone and co-head of distressed and special situtioan investing for GSO.

Structured Finance

GACS NPL ABS performance eyed

Sector developments and company hires

GACS NPL ABS performance eyed
A sum of eight new GACS non-performing loan securitisations priced in late 2020, with a cumulative balance of €3.4bn (securitising a cumulative original GBV of €13.4bn of NPLs), according to JPMorgan’s latest Italian NPL Performance Tracker report. Including these transactions, Italian NPL ABS issuance has risen to €22.1bn across 38 deals (including three non-GACS transactions), which have securitised NPLs with a cumulative original GBV of €95.9bn. Of this total, GACS issuance stands at €21.1bn, having securitised a cumulative original GBV of €87.1bn of NPLs.

Across the eight deals that priced in late 2020, the original deal size as a percentage of total securitised GBV averages 28.7%, including a range from 20.6% (YODA 2020-1) and 35.8% (Relais SPV). The JPMorgan report notes that this average is just above the 28.3% average seen for previously issued GACS deals.

The proportion of secured loans in these eight transactions averages 68%, with a range from 49% (Summer SPV) to 91% (TTNPL 1). This average is in line with the 67% average for previously issued GACS deals.

Through the most recent reporting period, the current outstanding volume of the 38 NPL securitisations in JPMorgan’s Tracker totals €17.5bn, representing an aggregate factor of 0.79. Among the 30 deals in the Tracker that have had at least one payment date, the aggregate current factor is 0.75, with a range from 0.43 (FINO 1, issued in November 2017) to 0.95 (BCCNP 2019-1, issued in December 2019).

Among the 24 Italian NPL securitisations with updated performance ratios, five deals (all GACS transactions) have definitively failed their cumulative collection ratio triggers in either the December 2020 or January 2021 reporting periods. Of these transactions, three (BPBNP 2016-1, ARAGN 2018-1 and ISEO SPV) reported their second consecutive breach, having also failed their triggers in the previous reporting period.

Finally, ratings downgrades continue to impact Italian NPL securitisations, as DBRS Morningstar downgraded its ratings on the class A notes from eight deals (BCCNP 2018-2, BLVDR 1, BPBNP 2016-1, BPBNP 2017-1, ISEO SPV, LVTCS 1, SNNPL 2018-1 and WORLD 2018-1). Current ratings for these notes now range from triple-B low (ISEO SPV) to single-B high (BPBNP 2017-1), with most in the double-B high to double-B range.

The rating agency also downgraded the class B notes from three of these transactions (BPBNP 2016-1, BPBNP 2017-1 and WORLD 2018-1) to triple-C, based on transaction performance.

In other news…

EMEA
Channel Capital Advisors has appointed Ian Watson as group coo, reporting to Walter Gontarek, ceo and chair. Watson will manage all corporate activities, including risk management, finance and operations. He will also oversee programme management activities, such as compliance and organisational efficiencies, and joins the Channel risk and management committee structures.

Watson has over 30 years’ experience working in capital markets globally. Previously, he served as ceo Asia Pacific and ceo/president of North America at Bibby Financial Services, and executive director at GMAC Commercial Finance in the UK. He joins Channel after serving as UK md at Corporate Linx.

ESG CLO impact limited
The growth of ESG investment criteria will have limited impact on CLOs and manager flexibility, according to a new report from Moody’s. It says that most European deals’ portfolio eligibility requirements already incorporate such criteria (85% of those issued in 2020 and 2021) and they are also picking up in the US.

In addition, Moody’s notes that ESG criteria of typically narrow scope - limited to certain very specific business activities, often in areas with little relevance for CLO investments - provide flexibility to CLO managers to avoid falling into such restrictions. In addition, a lack of precise definition in ESG-restricted business activities within transaction documents leaves managers ample room for interpretation, further increasing their flexibility.

Finnish issuer debuts
LocalTapiola Finance is in the market with a rare Finnish prime auto ABS, dubbed LT AutoRahoitus (Tommi 1). Only the STS-eligible 1.33-year class A notes are being offered.

The provisional €592m pool comprises 39,375 hire purchase contracts extended exclusively to retail customers, with a weighted average seasoning of 11.96 months and a weighted average original term of 64.26 months. The majority (78.26%) of the assets are used vehicles and balloon contracts account for 57.64% of the pool. There is no residual value exposure.

Pricing is expected during the week commencing 12 April. BNP Paribas is sole arranger and lead manager on the transaction.

North America
Winstead has promoted nine associates to of counsel, including Erika Larson and Norene Napper.

Larson is a member of the firm’s finance & banking practice group in Dallas. In her practice, she handles a variety of corporate and middle-market syndicated transactions, including cashflow and asset-based facilities.

Meanwhile, Napper is a member of the firm’s real estate finance practice group in Dallas. In her practice, Napper represents national CMBS and portfolio lenders, as well as telecommunications and wireless companies.

Second Hops Hill prepped
UK Mortgages (UKML) has signed a new warehouse facility - called Cornhill Mortgages No.7 - arranged by Santander to fund the forward flow purchases of newly originated buy-to-let mortgage loans under the company’s ongoing arrangement with Keystone Property Finance. The transaction is intended to fund portfolio growth to a size suitable for a public securitisation, expected to be the second Hops Hill RMBS.

Keystone’s monthly origination levels hit a record in March, with over £40m of origination. Hence, the pre-funding phase of the Hops Hill No.1 transaction has been completed early, meaning the additional origination - which already includes a pipeline of over £100m - will go into the Cornhill No.7 vehicle sooner than expected.

Meanwhile, the second Coventry sale and subsequent tender are expected to take place in late May and early June respectively (SCI 12 February).

SME ABS restructured
Banco delle Tre Venezie has amended its Magnolia BTV securitisation to provide for the transfer of an additional €140m portfolio to the SPV, financed with a further issuance of €116m class A and €24m class J notes. The aggregate portfolio comprises 763 mortgage (accounting for 48.2%) and senior unsecured loans to Italian SMEs for a total principal balance of €259.83m, up from 365 loans with a €128.38m aggregate principal balance, as of the January 2021 payment date.

A portion of the proceeds was used to replenish the cash reserve up to a new target amount, equal to 1.5% of the class A notes principal amount outstanding, down from 2%. Following a review of the transaction, DBRS Morningstar downgraded its rating on the class A notes from single-A (high) to single-A. S&P, meanwhile, affirmed its single-A rating.

Banca Finint acted as arranger on the restructuring and is providing management services to the securitisation vehicle, with Cappelli RCCD acting as legal consultant.

Upgrades on criteria update
DBRS Morningstar has taken rating actions on 50 European securitisations, following the finalisation of its European legal criteria. The majority of the securities have been upgraded, with three downgrades.

The finalised methodology includes a matrix to assess the risk of loss due to an account bank’s failure. The matrix expresses such risk of loss levels in ratings for different combinations of account bank rating triggers and current account bank ratings.

Where exposure to the account bank in the transaction is limited, other sources are expected to be available to the issuer to meet its imminent obligations. The combination of the account bank’s rating and a downgrade trigger results in a default risk for the bank that is commensurate with the rating on the highest-rated liabilities of the issuer.

The methodology also more clearly distinguishes collection account bank risk from commingling and/or issuer account bank risk and establishes typical expectations for liquidity to cover payment disruption risk.

Structured Finance

Non-resident Aussie RMBS debuts

Sector developments and company hires

Non-resident Aussie RMBS debuts
Brighten Home Loan is readying its inaugural RMBS - the A$250m Solaris Trust 2021-1 – which is backed by loans predominantly to non-Australian resident borrowers. S&P notes that the portfolio is not only exposed to macroeconomic events and policies that affect Australia, but also to events and policies that affect the borrowers’ countries of residence. Consequently, the rating agency has applied a higher default frequency to its analysis of the transaction to reflect the wider macroeconomic exposure beyond Australia and the limited asset performance record of a portfolio predominantly comprising of non-resident borrowers.

Approximately 81.5% of the underlying borrowers are residents of China. Westpac securitisation analysts note that such a high exposure to a single country exposes the transaction to potential disruptions in cashflow, due to events or policies affecting the flow of funds between countries.

As such, S&P has compressed default curves in its analysis of the deal to simulate a possible disruption in cashflow to the securitisation trust. The agency also highlights the potential difficulties in managing arrears and servicing the loans, as well as less homogeneity in the underwriting of loans, compared with the underwriting of borrowers who are residents of Australia.

The majority (95%) of the loans are for investment purposes and the pool features a weighted LVR of 60.1%, with no loans greater than 80% LVR, and a weighted average seasoning of 16.8 months.

In other news…

Investment boost for online lender
Digital-lending platform auxmoney has secured a €250m investment for its marketplace loans from Citi and Chenavari Investment Managers. The fintech is now co-investing for the first time alongside partners as part of this transaction. Dan Zakowski, svp marketplace funding at auxmoney, is heading the deal team for the transaction.

SVI adds synthetics verification
STS Verification International has developed a new verification report template and introduced an amended fee schedule to reflect the specifics of on-balance sheet synthetic securitisations, in light of the publication of the new STS Regulation and CRR amendments in the EU Official Journal (SCI passim). Both documents will become effective once the German Federal Financial Supervisory Authority (BaFin) has formally extended SVI's approval as Third Party in accordance with the Securitisation Regulation to include synthetic securitisations. The STS review of synthetic on-balance sheet securitisations will complement SVI's existing service for the STS review of true sale securitisations, as well as additional services, such as the provision of CRR assessments, Article 270 assessments, LCR assessments and gap analyses.

Structured Finance

Innovative UTP fund launched

Sector developments and company hires

Innovative UTP fund launched
illimity Group asset management company illimity SGR has completed the first closing of its illimity Credit & Corporate Turnaround (iCCT) fund, dedicated to investments in unlikely-to-pay (UTP) loans to SMEs with revival and relaunch prospects. The initial portfolio consists of loans for a total of over €200m made to 33 companies operating in diversified sectors.

These loans have been sold by seven banking groups - Banca Popolare di Sondrio, Banca Sella, Banco Desio, BNL Gruppo BNP Paribas, BPER Gruppo, Gruppo Bancario Cooperativo Iccrea and Gruppo La Cassa di Ravenna - which then became unit holders in the fund. The initial cash facilities – subscribed to by institutional investors, including illimity Bank – amount to €25m and will be used to service the acquired loans and support the turnaround of the companies in which the fund has invested.

The iCCT fund includes a number of innovative features, such as the ability to acquire and manage fully operational short-term credit lines and - through a securitisation structure - receivables and leasing agreements in continuity. These features enable the banks to fully transfer their financial exposure and to benefit from the restructuring process of the corporates.

The illimity Group was assisted by BE Partner in structuring SGR and the fund, as well as on negotiations regarding the purchase of the loans. PwC assisted SGR on the fairness of the loan valuations and relative valuation models. The securitisation of loans and leasing contracts was structured by Banca Finint.

illimity SGR says it intends to pursue a multi-product strategy, with further funds focusing on both SMEs and other sectors where it is able to leverage its skills, including by offering strategic advisory services.

Mortgages in forbearance drop
The number of mortgages in forbearance dropped in the last week by the biggest amount in six months, according to Black Knight. Active plans in forbearance fell by 228,000 from 30 March, a 9% drop in only seven days. The improvement was across the board, with FHA/VA loans recording the largest drop of 94,000, followed by a 69,000 fall in GSE loans.

While encouraging, the precipitous fall was anticipated as many borrowers exited forbearance plans as they hit the 12-month expiry date.

The number of active plans has declined by 323,000 in the last month, which represents the strongest rate of improvement since November. Forbearance has now been reduced by 51% from the peak.

As of 6 April, 2.3m of homeowners are still in forbearance, which is equivalent to 4.4% of all mortgage-holders. Another 500,000 plans face expirations at the end of April.

New York statute welcomed
The US securitisation industry has welcomed the signing into law by New York governor Andrew Cuomo of a new statute that should ease the transition from Libor to SOFR for contracts governed by New York law. The new law, inked on 6 April, had been expected (SCI 29 March).

The bill was developed and framed by the Alternative Reference Rates Committee (ARRC) and allows transactions without fallback language to automatically assume usage of SOFR upon the expiry of US dollar Libor, which is now likely to be mid-2023.

Most US RMBS and ABS Libor-linked notes issued before 2018 have no or inadequate fallback provisions, as the demise of the reference rate was never envisaged.

Under the terms of the new law, no counterparty can use the end of Libor as an excuse to step away from its contracted responsibilities. It also provides a safe harbour that prevents any counterparty from being held liable for any claims arising from the use of a new reference rate.

Though a good step, it does not mean the US structured finance market is out of the woods. The new law applies only to contracts governed by New York law and there is considerable disquiet in the industry that SOFR is an unsatisfactory replacement for Libor.

North America
Elementum has promoted Lynette Pirilla Walter to chief legal officer. She joined the firm in 2014, first as outside counsel and then in-house counsel beginning in 2019. Prior to Elementum, she practiced at Sidley Austin.

Additionally, Elementum (Bermuda) has recruited John Drnek as general counsel. He was previously at RenaissanceRe, where he provided counsel on legal, compliance and regulatory matters. Before that, he worked at Tokio Millennium Re, Mayer Brown, Hogan Lovells and Cadwalader.

US Bank has promoted John Stern to president of its global corporate trust and custody business, within the firm’s wealth management and investment services unit. He currently serves as US Bank corporate treasurer and will begin his new role on 17 May. Stern has around 20 years of experience in the sector and succeeds Joseph Giordano, who has announced his plans to retire this summer.

Pubco confirms securitisation waivers
Marston's reports that it has secured waivers and amendments to its bank, private placement and securitised facilities for the financial periods up to and including 1 January 2022. Within the securitisation, Marston's says it received strong support from bondholders, who have approved waivers for the two-quarter tests to 2 October 2021 and the four-quarter test to 1 January 2022. The group's banks and private placement have approved the adoption of liquidity and quarterly profit covenants to 1 January 2022.

Meanwhile, the group expects to reopen around 70% (circa 700) of its managed and franchised pubs in England with outdoor spaces on or around 12 April and, subject to final regulatory confirmation, the majority of its Scottish and Welsh pubs on 26 April. On the basis that the stated reopening roadmap set out by the UK government is adhered to, the remaining managed estate in England should open on or around 17 May with restricted indoor trading, and Marston’s is assuming a return to normal trading conditions from 21 June.