Contents

CMBS

Revving up

Strong demand continues for CRE CLOs

Sentiment in the US CRE CLO market remains relatively positive (SCI 10 May), with the multifamily sector in particular seeing robust demand. The outlook for the office sector is mixed, however.

“The CRE CLO market is hitting all cylinders. There is strong investor demand for new issuance and issuers have a strong origination pipeline,” says John Amman, svp, North American CMBS at DBRS Morningstar.

In particular, acquisition loans and multifamily loans appear to be dominating origination at present. For example, multifamily loans have increased to 58% of transactions closed from April 2020 to April 2021, up from 44% for all transactions closed through March 2020 and 47% for all transactions closed through April 2021.

Amman notes: “A recent trend is that the ramp component in managed transaction may only allow for multifamily loans, which is a shift from pre-pandemic, when there was less restrictions around the loans that could ramp up the loan pool. There isn’t a lot of hotel loans coming through, but as markets change, then there may be opportunity for those loans.”

He adds that the industrial sector has sky-rocketed, while hotel values are down 11% and mall values have fallen to over 20%. 

While static transactions were more commonly issued during the early stages of the pandemic, managed transactions have become more common in 2021.

Regarding transactions rated by DBRS Morningstar with reinvestment periods, during 2021, there have been 79 new assets added across 15 rated deals totaling US$1.45bn of trust debt. As of April 2021, servicer corrective loans stood at 161 loans totaling US$3.4bn at a rate of 8%.

Stephen Koehler, vp at DBRS Morningstar, says: “It doesn’t matter where your properties are; if you need assistance, then the servicer is going to work with them to get the loan back on track.”

Several factors are contributing to the low special servicing rate for loans in CRE CLO transactions. These include loan structures with upfront reserves, a willingness for borrowers and collateral managers to work together and relationship lending.

Koehler points out that issuers hold the below investment-grade rated bonds and that all these motivations work in concert with one another. “The acquisition financing is approximately a 2:1 ratio, with borrowers often putting 20% or more down. If there is an expectation that properties will have short-term cashflow disruption at loan issuance based on borrowers’ business plans, upfront equity contributions - along with any applicable upfront reserves - mitigate this risk.”

Both multifamily and office performance in city centres, such as Chicago and New York, have softened where rents have been declining and vacancy rates have increased. But Amman remains hopeful: “Looking forward, we expect these properties to recover, as people will return to the cities and to work.”

Overall, office property values are down by around 10% from the start of the pandemic and the outlook remains soft. “Office utilisation is down significantly [but] those numbers are increasing more as people are [returning to] the office. With the vaccines on the rise, there are positive outlooks for that,” says Amman.

However, how much of office buildings will ultimately be used and whether there will there be downsizing remains to be seen.

Angela Sharda

Structured Finance

SCI Start the Week - 17 May

A review of securitisation activity over the past seven days

Last week's stories
Biden bonanza
Vast infrastructure package to energise project finance CLOs
CRE CLO surge
Record issuance expected
Demand drivers
Fundamentals and technicals support US CLOs for now
Geographical divergence
CSEE moratoria more likely to underperform
Lone Star rising
A soup to nuts profile of TCBI's inaugural CRT (Premium content)
Mortgage-backed SRT priced
Credit Suisse executes Elvetia refinancing
Virtuous circle?
Bullish sentiment underpins securitisation opportunity
Bad weather bonds
Utilities to make use of ABS to rebuild after extreme weather
This year has already seen two utility recovery charge (URC) ABS transactions in the US and, say analysts, more will be priced as extreme weather becomes more common - which some climate modellers predict.

"We've seen two so far this year and there is rumbling of more to come due to legislation already in place, as well as possible future legislation being put in place. The general market expectation is that there will be more. In recent years we've seen maybe one or two a year at most," says Inga Smolyar, senior credit officer at Moody's in New York.

Earlier this month, California utlity PG&E received permission from the Public Utilities Commission of California to issue a $7.5bn recovery bond to finance costs and expenditures related to the devastating 2017 wildfires. When priced, this will be the largest public utilitty securitisation ever seen.

At the end of April, Wisconsin Electric Power (WEPCO) raised $118m in environmental trust bonds to recover costs associated with the retiring of a coal-fired energy plant.

In all these deals, special dispensation was required from the state legislatures but the latter seem more willing to alllow utlities to seek restitution of costs through the ABS markets. In February, for example, the Texas authorities granted permission to utilities to seek recovery of costs incurred in system restoration after such events as hurricanes and violent storms.

The receivables in a URC ABS are derived from additional one-item fees levied on customers, based on their utility usage. The scheduled payments in the bond are based upon the projected additional fees, which are generally highly predictable.

Moody's affiliate Four Tweny Seven, a Callifornia-based cllimate risk data firm, says that in the next one to two decades the risk of water stress, hurricanes, excessive rainfall and extreme heat will worsen in certain regions of the US.

The damage that utilities incur and the loss of revenue as a result of such incidences of extreme weather can leave utilities dangerosuly exposed. Indeed, PG&E accepted culpability for its role in the 2017 wildfires which left it facing billions of dollars in legal claims. Utilities also need to rebuild infrastructure after violent weather conditions.

Not only do extreme weather events leave utilities needing to issue more debt to cope with increased costs and expenses, such events can also interrupt the payment flows into existing ABS deals. The weather need not be apocalyptic to interrupt payments; warmer than usual winters or cooler than normal summers can result in reduced elecric usage

Moreover, certain states have imposed moratoriums that prevent the disconnection of customers from the power grid in cases of severe weather, and this can lead to a significant proportion of fee-payers failing to make payments.

However, these developments do not pose a significant risk of delinquency to UCR bonds, says Moody's. Transactions incorporate legislatively mandated true-up mechanisms, which are periodically adjusted to ensure that the ABS deal makes scheduled payments even when revenue derived from fees falls short of expected levels.

In addition, deals have reserve accounts, generally equal to 0.05% of the initial note balance or equivalent to one semi-annual bond payment.

It would also be highly unusual for electric usage to completely shut down for a long period over the entire area to which the utility supplies power. The only incident in recent times when this did occur was Hurricane Sandy, which devastated large areas of New York in 2012, but even then no interest payments in affected utility ABS deals were missed.

"We are not aware of legislation authorising UCR bonds being revoked in the past, and at the end of the day we don't see a credit impact to the bonds from extreme weather either, given the true-up adjustment mechanisms," says Smolyar.

Simon Boughey

Other deal-related news

• Hertz has determined that a revised proposal to provide equity capital to fund its exit from Chapter 11 - made by affiliates of Knighthead Capital Management, Certares Opportunities and Apollo Capital Management - constitutes a superior proposal than the one contemplated by its agreement with its existing plan sponsors, affiliates of Centerbridge Capital Partners, Warburg Pincus and Dundon Capital Partners (SCI 10 May).
• Domivest is in the market with the first-ever STS buy-to-let RMBS (SCI 11 May).
• In a letter to US Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell, the Structured Finance Association has expressed its opposition to Senate Joint Resolution 15, which would invalidate the true lender rule issued by the OCC last year (SCI 11 May).
• The EIB has disclosed that it invested €50m in UCI's latest RMBS, Prado VIII, aimed at promoting the renovation of existing residential buildings in Spain and Portugal, as well as the purchase of new near zero energy housing (SCI 12 May).
• The Australian Prudential Regulation Authority has launched a consultation on proposed measures to enhance the capital adequacy of authorised deposit-taking institutions (SCI 12 May).
• Fitch says it will no longer include a near-term stress sensitivity scenario that notches down half of ratings with negative rating outlooks with a floor of triple-C minus in its analysis of US CLO notes (SCI 12 May).
• M&G has launched long-dated fixed rate mortgages in Ireland with its origination partner Finance Ireland (SCI 13 May).
• The Principles for Responsible Investment has published a report that examines the challenges associated with incorporating ESG in securitised products (SCI 14 May).
• Von der Heydt Asset Servicing and Immutable Insight Capital Management have partnered to securitise the blockchain fund, Blockchainfonds II (SCI 14 May).

Company and people moves

• Mount Logan Capital subsidiary Great Lakes Senior MLC I has entered into a facility and security agreement with a large US-domiciled financial institution, as administrative agent (SCI 10 May).
• Blazehill Capital has hired Jake Hyman as business development director, signalling its commitment to sourcing and executing complex credit opportunities in the UK mid-market (SCI 10 May).
• SME Capital, SCIO Capital and Prytania Asset Management have formed a funding partnership to help support UK SMEs take the next step in their evolution, whether that is growth, acquisition or succession (SCI 10 May).
• Brazilian alternative investment firm Vinci Partners Investments has established a joint venture with agribusiness investment firm Chrimata involving a new strategy, which will be co-managed by Vinci Partners' real estate and credit teams (SCI 11 May).
• Family Legacy Capital Management has formed FLC Credit Partners, a private credit fund manager providing financing solutions to capital-constrained, lower middle market companies in North America (SCI 11 May).
• Frost Brown Todd has promoted three CMBS attorneys in its Louisville office (SCI 11 May).
• Bain Capital Ventures has named Noah Breslow operator in residence, based in New York (SCI 12 May).
• Income Research + Management has strengthened its client service team with two new recruits (SCI 12 May).
• DWS has launched the DWS Secured Income Fund, aimed at small to medium-sized defined benefit pension plans seeking stable, long-term returns (SCI 13 May).
• Alok Kumar has rejoined Channel Capital Advisors as head of portfolio analysis in the trade finance team, responsible for leading the sourcing, analysing and negotiating of transactions (SCI 13 May).
• Arthur J Gallagher & Co is set to acquire certain Willis Towers Watson reinsurance, specialty and retail brokerage operations as part of a proposed regulatory remedy for the pending Aon and Willis Towers Watson combination (SCI 13 May).
• Adams Street Partners has recruited Leland Richards as a partner on the private credit team (SCI 13 May).
• Leadenhall-backed Nectaris Re, a Bermuda-based Class 3A reinsurance company, has obtained a financial strength rating of A (Excellent) and a long-term issuer credit rating of 'a' from AM Best (SCI 14 May).
• The US SEC has approved the registration of its first security-based swap data repository - DTCC Data Repository (US) (SCI 14 May).
• Schroders has launched the Schroder GAIA Oaktree Credit fund, a global multi-strategy credit portfolio that offers investors access to high-conviction liquid credit opportunities (SCI 14 May).

Data

Recent research to download
TCBI Deal Profile - May 2021
The Collins Amendment - March 2021
2021 Outlook - March 2021
CLO Case Study - Spring 2021

Upcoming events
SCI's 1st Annual CLO Special Opportunities Seminar
29 June 2021, Virtual Event
SCI's 3rd Annual NPL Securitisation Seminar
September 2021, Virtual Event
SCI's 7th Capital Relief Trades Seminar
13 October 2021, In Person Event

Capital Relief Trades

SRT boost

Barclays expands Colonnade platform

Barclays has finalised two capital relief trades from the Colonnade programme that reference global corporate and commercial real estate loans. The transactions are the bank’s fourth and fifth trades of this kind, following similar deals last year. Indeed, the lender will continue to incorporate both types of assets in the programme going forward, both for size and granularity purposes.

According to Frank Benhamou, head of funding and capital solutions at Barclays: ‘’By increasing the granularity of the pools, Barclays is improving value for itself and its investors, since the standard deviation of returns decrease.’’

Nevertheless, although the integration of commercial real estate in Colonnade is now a staple of the bank’s issuance going forward, it will likely remain a minority of the overall portfolio.

Colonnade is a programmatic platform with an annual issuance plan that, since 2016, has been responsible for US$5bn of junior tranche notional. The platform offers a high level of consistency across all transactions, both in terms of documentation and portfolio construction. One of the key features of all deals is that they are bilateral, with the aim of building strong long-term relationships with investors.

Barclays launched the programme in 2016 to replace CDS structures with the financial guarantee format. The drivers of the programme are to secure both capital savings and risk protection, as well as mitigate IFRS 9 impairment volatility.

Benhamou notes that mitigation of IFRS 9 volatility works better for fully funded first loss tranches attaching at 0%, as opposed to mezzanine or unfunded tranches, given counterparty risk. Another driver is stress test mitigation, since banks can model losses, as well as factor in associated hedges.

Despite their consistency, Colonnade deals have undergone some changes following the coronavirus crisis, as evidenced by shorter replenishment periods and higher pricing. However, since December 2020, replenishment periods have expanded back to the typical three-year period and pricing is now closer to pre-Covid levels.

Stelios Papadopoulos

Structured Finance

OMFIT debuts SOFR-linked notes

Sector developments and company hires

OMFIT debuts SOFR-linked notes
OneMain has become the first US securitisation issuer to offer a SOFR-linked floating-rate tranche. The US$500m OneMain Financial Issuance Trust 2021-1 includes triple-A rated class A2 notes - that will be sized to demand – linked to a rate that will be set in advance using 30-day compounded SOFR, although the deal documentation has provision to switch to term SOFR at a future date, according to JPMorgan ABS analysts.

The 30-day compounded SOFR will be determined two business days prior to the accrual period, in line with the ARRC’s securitised working group recommendations. Barring administrative or operational delays, the issuer would switch to term SOFR once the rate is recognised by the relevant government body.

The transaction is backed by a US$531.92m portfolio comprising 68,811 loans with an average balance of US$7,730, according to KBRA.

UK credit card ABS issuer NewDay publicly placed US dollar-denominated SOFR-linked class A2 notes earlier this year (SCI 1 February).

In other news…

Acquisition
Black Knight has acquired eMBS, which provides agency MBS performance data and analytics. Clients can access either granular agency data or summarised database-ready information, with pre-calculated prepayments and market aggregations. Leveraging eMBS' capabilities can reduce the costs of data, systems and personnel by eliminating the need for mortgage-specific data feeds, as well as programmes required to update and display this data.

CMBS maturity spike eyed
US CMBS loan refinancings are likely to remain under pressure over the next 18 months, given continued business interruption at many properties, uneven reopening of the country, depressed in-place cashflows and secular shifts caused by the coronavirus pandemic. Approximately US$7.5bn of performing, non-defeased loans within the Fitch-rated US CMBS 2.0 conduit and Freddie Mac universe are scheduled to mature through the remainder of 2021. The agency notes that maturities are manageable over each of the next three quarters - with US$1.6bn for the rest of Q2, US$3.1bn in Q3 and US$2.8bn in Q4 - but then jumps significantly to nearly US$20bn in 2022.

Performance of multifamily, industrial and self-storage properties remained resilient throughout the pandemic, sparking increased investor demand, lending capital and interest that will support the refinanceability of these loans. However, many retail and hotel properties will have difficulty refinancing.

Fitch suggests that properties that were already struggling prior to the pandemic or those with limited rebound potential, or where sponsors no longer want to inject additional equity to carry the property, will default at or prior to their maturities. The agency anticipates that extensions will continue for near-term maturing loans with committed borrowers and the expectation for stabilisation.

Further, loans secured by office properties with weak occupancies strained by limited leasing momentum, upcoming rollover and a high concentration of non-creditworthy or co-working tenancy will face refinancing difficulties. Fitch anticipates a trickle of defaults in this sector to continue through year-end.

EMEA
Guy Carpenter has appointed Luca Tres as head of strategic risk and capital life solutions, EMEA, effective from 1 June. Tres will be responsible for driving continued growth in the development and delivery of non-traditional life solutions to clients throughout the region, assisting them with achieving their short- and long-term capital, risk and financial objectives. Based in Milan, he will report to Massimo Reina, ceo, Europe, Guy Carpenter.

Most recently, Tres was a partner at Securis Investment Partners, where he led the life origination and structuring area globally. Prior to this, he was vp - structured insurance and bank solutions Europe at Deutsche Bank.

Peak Reinsurance (Peak Re) has hired Sascha Bruns as director, head of global retrocession. He will join the firm on 1 September from Hannover Re, where he was a senior underwriter in the group protections team, specialising in natural catastrophe retrocession placements and securitisations.

First US social MBS priced
Angel Oak last week priced the first US non-agency RMBS that qualifies as a social bond – the US$231m non-QM RMBS Angel Oak Mortgage Trust 2021-2. Angel Oak says it undertook a high level of diligence in qualifying loans for the deal and adhered to the standards put in place by ICMA’s Social Bond Principles and also secured a second-party opinion from ISS ESG to confirm alignment with these standards.

In addition, Angel Oak reports that it developed a comprehensive framework and used extensive data analytics to categorise and quantify the bonds’ social impact at the loan level. “The securitisation pooled loans that generally offer mortgage financing solutions for underserved US homebuyers, who are not able to borrow through traditional lending channels,” it notes. “These borrowers largely include self-employed individuals, a sector of the population that has disproportionately felt the economic strain caused by the Covid-19 pandemic.”

North America
RBC Capital Markets has hired Alex Hu as head of CLO structuring, based in New York. Previously a director in Citi’s CLO team, he will report to Mukund Sadagopan, who is currently head of CLO structuring at RBC but will be transitioning to a new role.  

Private auto ABS inked
Auto finance provider 247 Money has completed its first private securitisation, which will help support the firm’s strong origination pipeline. The arrangement provides 247 Money with total available commitments over the life of the securitisation of up to £305m, with senior funding from NatWest and mezzanine funding from East Lodge Capital. The firm specialises in hire purchase contracts for used vehicles across the UK and is a part of the 247 Group, which includes CarFinance 247, the UK's leading online car finance marketplace.

SECR implementation analysed
The Joint Committee of the European Supervisory Authorities (ESAs) has published an analysis of the implementation and functioning of the EU Securitisation Regulation (SECR), including recommendations on how to address initial inconsistencies and challenges, which may affect the overall efficiency of the current securitisation regime. The report is meant to provide guidance to the European Commission in the context of its review of the functioning of the SECR.

The report notes that some adjustments could be considered to further improve the overall consistency of the existing framework. In particular, given the increase in private securitisation issuance and considering the SECR objectives of access to information and investor protection, a more precise legal definition for private securitisations should be specified in the SECR in order to clearly identify private securitisations that should comply with the transparency requirements. Data reported for those private securitisations should also be made available by means of a securitisation repository.

Regulatory guidance would also be useful to specify how proportionality could be implemented in the area of due diligence, in order to facilitate the entrance of new investors to the EU securitisation market.

A further recommendation is targeted amendments in the STS criteria to facilitate the use of the STS label for ABCP programmes. In addition, in the medium term, as more STS issuances are executed and the STS market reaches a stable pace, further analysis should be performed by the European Commission with the ESAs’ support to determine how the STS criteria could be simplified without reducing the quality of the standard.

Finally, in order to further enhance the supervision of securitisation requirements, it is deemed necessary to explore: how to develop common EU supervisory tools; potential alternatives to the current STS supervisory framework, in particular for those jurisdictions with limited STS securitisation issuances; and the relevance of a common EU approach to the ongoing supervision of authorisation conditions for third-party verifiers.

Structured Finance

Blue investable markets study underway

Sector developments and company hires

Blue investable markets study underway
The European Commission and the EIB Group have increased their cooperation to implement a new EU Sustainable Blue Economy policy. Under the agreement, both institutions will work jointly with EU Member States to meet financing needs to reduce pollution in European seas and support investment for blue innovation and blue bioeconomy.

As such, the EIB intends to finance operations aimed at reducing discharge of chemical pollutants, nutrients, plastic waste and micro-plastics to the ocean. It will also support improved waste, wastewater and storm water management.

Both institutions will carry out a comprehensive market study and identify investable projects for pollution avoidance and reduction, as well as offer solutions to increase access to financing - including through risk reduction facilities and provision of loans, aimed at incentivising private and public financiers to provide additional liquidity to such projects.

In other news…

Appraisal declines gauged
A new KBRA report shows that US CMBS appraisals were on average 30.2% lower than valuations available at the time of securitisation, based on 1,078 commercial real estate valuations from 1 April 2020 through March 2021. The rating agency segregated the valuations into two six-month timeframes - April-September 2020 (Period 1) and October 2020-March 2021 (Period 2) - to determine any observable differences in value changes between these periods.

The report finds that valuations declined more in Period 2 (33%) compared with Period 1 (28.9%). Of the updated appraisals, 22 (2%) had value declines of greater than 80%, while 112 (10.4%) had valuation increases.

For the full 12-month period, the retail segment saw the largest average valuation decline (36.9%), led by 53 malls that experienced an average 62.3% decline. Oakdale Mall in Johnson City, New York, had the largest property valuation decline (93%).

Among the top five states with the most updated appraisals, Texas (with 120 updated appraisals) had the largest average property value decline (34.9%). The state accounted for 11% of the updated appraisal population.

Finally, although the valuation increases were not as dramatic as the declines, Whalers Village in Lahaina, Hawaii had the largest valuation increase (75.5%).

RFC issued on ESG credit factors
S&P is requesting comments on its proposed methodology articulating the principles it applies to incorporate ESG credit factors into credit ratings analysis. The agency does this through the application of sector-specific criteria when it believes the ESG factors are, or may be, relevant and material to credit ratings. The intention of the proposed methodology is to enhance the transparency of how ESG factors can influence creditworthiness.

The proposed methodology is in two sections. The first section describes ESG credit factors and how S&P captures them in its credit ratings through the application of criteria.

The second section describes general principles related to ESG credit factors. These include: how their influence on creditworthiness can differ by industry, geography and entity; the potential influence of ESG credit factors on credit ratings over time; and the relationship between creditworthiness and ESG.

Comments should be submitted by 17 June. S&P does not expect the criteria, as proposed, to affect any existing credit ratings.

Structured Finance

Data centre leverage 'inconsistent' with ratings

Sector developments and company hires

Data centre leverage ‘inconsistent’ with ratings
A number of wholesale data centre securitisations issued in recent years carry elevated leverage that is inconsistent with the single-A rating category, Fitch suggests. The rating agency states that these transactions have weaker credit characteristics and substantially higher leverage multiples than other comparable digital real estate securitisations, such as wireless tower transactions, and higher leverage multiples than single-borrower CMBS backed by trophy assets. As such, it believes these transactions require more credit protection to achieve high investment-grade ratings.

A number of single-A rated wholesale data centre transactions have been issued recently with debt/issuer expected cashflow multiples of 11x-13x. By contrast, Fitch single-A rated tranches of wireless tower and best-in-class single-borrower CMBS have historically had 7x-9x leverage.

“Data centre leverage is incongruous with a single-A rating, as transactions backed by more volatile cashflows support lower leverage than transactions backed by wireless towers and trophy real estate assets that are backed by more predictable cashflows,” it observes.

Ratings analysis for data centre transactions emphasise LTV to assess leverage, typically targeting 70% LTV for single-A ratings. “While LTV is useful, it does not address relative exposure to cashflow declines, refinance risk and technological obsolescence - all of which Fitch considers in its analysis. Using cashflow to assess leverage more clearly illustrates the cashflow decline a property could withstand before debt service coverage falls below zero, the maximum interest rate and loan balance supported in a refinance scenario, and the amount of time required to repay a loan under a cashflow sweep scenario,” the agency adds.

It points out that data centre cashflow is vulnerable to technological obsolescence, oversupply and tenant churn.

In other news…

CIFC launches philanthropic programme
CIFC Asset Management has launched the CLO Initiative for Change, a philanthropic programme in connection with CLOs issued by the firm, dedicated to supporting organisations driving social, economic or environmental change. Under the initiative, CIFC has partnered with the deal parties of its latest CLO - CIFC Funding 2021-IV - including RBC Capital Markets, Appleby (Cayman), Allen & Overy, Milbank, BNY Mellon and Locke Lord, to make a collective contribution of US$145,000 to Black Girls CODE (BGC). The programme is commited to making coordinated donations of this kind on an annual basis to different organisations.

Founded by Kimberly Bryant in 2011, BGC is a non-profit organisation focused on empowering girls of colour aged seven to 17 to become innovators in the science, technology, engineering and maths (STEM) fields, leaders in their communities and builders of their own futures through exposure to computer science and technology. The organisation aspires to educate one million girls of colour by 2040 through after-school programmes, workshops, virtual events, mentorships, summer programmes and access to a growing alumni network.

EMEA
Blackstar Capital has appointed James Paul as head of sport, responsible for leading the firm’s expansion into the sporting portfolio segment. Paul joined Blackstar in 2020 as a portfolio manager. Prior to joining Blackstar Capital, he gained more than eight years’ experience in a number of credit-focused roles at JPMorgan, Credit Suisse and 23 Capital, covering a range of industries, geographies, asset classes and product types.

Structured Finance

Strategic credit commitment inked

Sector developments and company hires

Strategic credit commitment inked
The Investment Management Corporation of Ontario (IMCO) has closed a US$500m commitment with a new strategic partner, Ares Management Corporation. IMCO has allocated US$400m of the commitment to a fund of one structure and US$100m to Ares Pathfinder Fund, a flagship global alternative credit fund. Pathfinder pursues a differentiated strategy of providing tailored financial solutions for owners of large, diversified portfolios of assets that generate predictable and contractual cashflows throughout market cycles.

Created as a separate asset class in 2020, IMCO’s global credit portfolio invests across a range of public and private credit market segments, including corporate, real estate, infrastructure, emerging markets, structured and IP royalties to generate higher risk-adjusted returns than traditional fixed income and additional diversification benefits to a total portfolio for Ontario public sector fund clients. The global credit portfolio had C$4.6bn AUM, as of 31 December 2020, and is expected to grow to C$8bn or more by 2025.

EMEA
Conister Finance & Leasing has hired Marcus Gregory as its new executive director. In this new role, Gregory will lead Conister’s broker division, with his core responsibilities including the planning and delivery of the firm’s strategy in the UK market. He brings over 20 years’ experience working within the asset finance and commercial loans sector, having co-founded a privately owned leasing brokerage in 2007, Bluestar Leasing.

Volta Finance has appointed Dagmar Kent Kershaw as an independent non-executive director, with effect from 30 June. Kershaw is an experienced non-executive director, with over 25 years’ experience in financial markets, leading and developing fund management and alternative debt businesses. She headed Prudential M&G's debt private placement activities and launched its structured credit business in 1998, which she led for 10 years.

In 2008, she joined Intermediate Capital Group to head its European and Australian credit business, including CLOs. Since 2017, she has held non-executive positions and is currently a director of Brooks Macdonald and Aberdeen Smaller Companies Income Trust, as well as a member of the advisory council of SVP Global (Strategic Value Partners).

Paul Varotsis, currently senior independent director at Volta Finance, is set to retire from the position at the company’s forthcoming AGM.  

Structured Finance

RFC issued on benchmark regulation powers

Sector developments and company hires

RFC issued on benchmark regulation powers
The UK FCA has published a consultation on its proposed policy framework for exercising two of its new powers under the Benchmarks Regulation (BMR), which will be introduced by the Financial Services Act 2021. These powers aim to facilitate an orderly wind-down of critical benchmarks like Libor and help users that cannot transition to a replacement benchmark before the Libor panels end.

The FCA has already established its policy framework for exercising its new powers to require continued publication of critical benchmarks using a changed methodology, and when it could access those powers. Soon it will be consulting on using those powers to implement a ‘synthetic Libor’ rate for some sterling and yen Libor settings.

Where a synthetic Libor rate is implemented, the FCA will also need to determine who is permitted to use it. This is because use of a permanently non-representative benchmark would be prohibited under the BMR, but the FCA can permit some or all legacy use to continue.

The FCA says it will finalise its policies in light of the feedback received. It will then aim to consult in Q3 on its proposed decisions on precisely what legacy use to allow for any synthetic sterling and yen Libor, as well as how it might restrict new use of Libor rates, including US dollar Libor. The FCA intends to confirm its final decisions as soon as practicable in Q4.

In other news…

Benchmark replaced on first CRE CLOs
KBRA reports that the Libor benchmark in two of its rated US CRE CLOs, AREIT 2020-CRE4 and BXMT 2020-FL3, has been replaced by SOFR. The designated transaction representative on the two deals, Wells Fargo, has determined that a benchmark transition event occurred as a result of ICE Benchmark Administration’s recent announcement (SCI 8 March) and that the benchmark replacement date will be 15 June 2021.

EMEA
Marcel Grandi has joined Twelve Capital’s Zurich office as senior advisor, ILS, responsible for supporting the investment team with the sourcing of ILS transactions. He has extensive experience in the ILS space, having spent 13 years with Credit Suisse ILS and 10 years with Munich Re in various senior functions.

North America
W R Berkely has appointed Vincent Myers vp - alternative capital. He was previously head of third-party capital at AXIS Capital and has also worked at Rewire Holdings and Swiss Re.