News Analysis
Capital Relief Trades
Room to run?
MDB CRT challenges persist
A number of challenges continue to constrain multilateral development bank capital relief trade issuance. This Premium Content article investigates whether these obstacles can be overcome.
The African Development Bank’s (AfDB) landmark Room2Run (R2R) transaction marked the first capital relief trade issued by a multilateral development bank (MDB) and heightened expectations for a boost in such issuance (SCI 20 September 2018). However, the reality turned out to be very different, given several challenges - including the lack of performance data. Yet the key obstacle to further MDB issuances appears to be rating agency methodologies.
The introduction of the United Nation’s Sustainable Development Goals (SDGs) in 2015 represented a commitment to an ambitious development agenda that underlined the need to unlock private capital to deliver on those goals. However, the reality is yet to match the high expectations set under that agenda.
According to OECD data, private capital mobilisation has grown substantially over the 2012-2019 period through guarantees, direct investments and shares in collective investment vehicles, although 2019 data signal a decrease in activity compared to 2018 (see Figure one). Overall, private finance is far from bridging the approximately US$3.7trn SDG financing gap.
MDBs play a key role in furthering the SDGs as providers of long-term development finance. However, their financing and lending model limit the amounts that can be mobilised.
The MDB model requires issuing large volumes of long-term debt securities on international markets at low yields to allow lending at competitive rates to borrowers in developing countries. The model is based on the assumption that investors and rating agencies consider MDB credit standing to be extremely high. However, this places a limit on the degree of leverage that can be achieved and makes it unrealistic to expect trillions to be mobilised simply through leveraging up, given current capital levels.
According to a November 2021 report for the Inter-American Development bank (IDB) that was co-authored by William Perraudin, director at Risk Control: ‘’MDBs will need more capital to make a significant impact on the ambitious SDGs. At the same time, it is widely understood that MDBs should make the most of the capital that they do have.’’
The 2015 MDB action plan for balance sheet optimisation echoed this by highlighting the need for these banks to maximise their impact and enhance balance sheet efficiency. This is where risk transfer mechanisms - including synthetic securitisations - enter the picture.
The IDB report emphasises the fact that risk transfer allows private investors and public institutions to share in MDB loan portfolio risk in ways that are aligned with their respective risk appetites and development objectives. As they take development-related credit risk off MDB balance sheets, they allow MDBs to lend more for a given amount of capital.
Similarly, the OECD noted in a landmark report published last year (SCI 28 September 2021) that risk transfer mechanisms aggregate projects at the portfolio level and thereby link demand for finance from entrepreneurs and SMEs in developing countries with institutional investor capital. Effectively, these tools act as an intermediation mechanism that enable large-scale investors – both institutional investors and development financiers – to access a dedicated exposure that they normally would not consider due to ‘’ticket size mismatches, lack of due diligence knowledge, lack of local presence, high transaction costs or high perceived risks’’, states the OECD report.
Consequently, risk transfer technology both helps MDBs manage their balance sheet more efficiently and attract private capital in developing countries. However, risk transfer issuance from MDBs - particularly synthetic securitisation volume - remains stagnant, despite the bullish projections following the execution of the AfDB’s landmark R2R deal back in 2018.
The R2R transaction was the first-ever synthetic securitisation of an MDB’s private sector loan portfolio and allowed the AfDB to offset US$1bn of credit risk. Commercial investors included the Mariner Investment Group as anchor investors. The European Commission provided credit enhancement in the form of a credit risk guarantee on the senior mezzanine notes.
The challenges for MDBs are threefold and unless they are resolved, synthetic securitisation issuance from these institutions will remain heavily constrained. The first challenge pertains to the preferred creditor status of MDBs.
An important element of the MDB business model is the willingness of borrowing member states to treat MDBs as preferred creditors. The de facto seniority that these banks and other multilateral lenders like the IMF enjoy is commonly referred to as preferred creditor treatment (PCT).
Bond markets - through high credit ratings or otherwise - implicitly recognise PCT, resulting in narrow spreads for MDB bonds. The favourable pricing, in turn, enables MDBs to finance themselves cheaply. As such, PCT status remains important for these institutions.
One criticism levelled against the use of synthetic securitisations, according to the IDB report, is that they could undermine the PCT status of MDBs - and this is something that rating agencies are unlikely to ignore. The logic here is that countries might selectively default on loans where the MDB has transferred the credit risk to a third party.
Alvise Lennkh, deputy head of sovereign and public sector ratings, at Scope remarks: ‘’MDBs need to remain the lender of record and sanction borrowers in case of selective defaults. Retention of risk here will be key and should be substantive. Selective defaults would threaten our view of the transferability of the MDB’s preferred creditor status and the rating of an SRT transaction.’’
Suzana Sava-Montanari, partner at Latham & Watkins, responds: ‘’You can say this about any synthetic securitisation, but there are established practices to address this, such as Chinese walls that block information between departments and maintain confidentiality. Furthermore, the bank remains the lender of record and continues to manage the loans in the portfolio, as if the risk transfer had not occurred.’’
Indeed, the point of synthetic securitisations is that banks can continue to own and control their exposures. Daniel Bond, principal advisor at Mida Advisors, remarks: ‘’For MDBs and other development finance institutions, synthetic risk transfer is a good way for them to expand their lending capacity because they can maintain control over their exposures while transferring credit risk. They have a special relationship with their borrowers that they want to maintain.’’
Another obstacle is the lack of data. ‘’Performance data are crucial for issuance. The performance of MDB assets is strong, thanks in part to local knowledge and borrower relationships, but they’re not granular enough,’’ says Molly Whitehouse, md at Newmarket.
Yet the greatest challenge is rating agency methodologies. MDBs are unregulated, but they typically issue significant amounts of debt in global markets, where the views of the rating agencies matter. The rating agencies therefore act as the de facto regulator.
According to the IDB report, rating agency methodologies do not fully consider ‘’the superior credit performance of MDB loans’’ and the agencies do recognise the PCT status of MDBs to some extent when they rate them, but there is ‘’insufficient reflection of PCT in the securitisation rating methodologies, relevant in evaluating the retained senior tranches of risk transfer transactions.’’
Hence, the capital consumption of the retained portions of synthetic securitisations are treated too conservatively. However, from the perspective of the rating agencies, the obstacle is the MDBs themselves.
Olivier Toutain, executive director at Scope, notes: ‘’Rating assessments need to look at default risk and recovery rates. If there aren’t enough historical data, then the rating agencies would need to take a conservative view using comparable information. This is normal and not specific to MDBs. MDBs though benefit from their preferred creditor status, but most information on credit defaults is linked to loans with no such status.’’
He continues: ‘’In the corporate world, you have secured and unsecured debt - with secured having higher recoveries than unsecured - and there’s plenty of data to show this. MDBs, on the other hand, will say that their preferred creditor status gives them priority in case of a default, so there’s no need to disclose as much data. Yet we need more data.’’
Nevertheless, the case of the African Development Bank shows that the rating agencies can adapt their methodologies. Juan Carlos Martorell, consultant at Munich Re, was heavily involved in the transaction as a structurer at Mizuho. The Japanese bank acted as the arranger on the deal.
He explains: ‘’In the R2R deal, S&P was able to capture the capital benefit by using a similar methodology used for SRTs from commercial banks, where the risk weights of retained tranches are rendered lower after the securitisation. The retained tranche becomes equivalent to the risk weight of a single-A rating.’’
Risk Control states in a report on the R2R transaction that a crucial factor in getting the green light from S&P was the agency’s decision to apply its Risk Adjusted Capital Framework (RACF) in determining risk weights for the retained senior tranche, rather than the CDO Evaluator approach. The latter is essentially a simulation of correlated defaults.
‘’This decision may have been driven by concerns about the appropriateness of the parameters of the CDO Evaluator for emerging markets. It suggests that some reconsideration of risk parameters for emerging markets might be appropriate,’’ says Risk Control.
Under the RACF, S&P applies risk weights to different tranches of securitisations according to tranche rating. Thus, a crucial consideration for the AfDB was the rating/risk weight that the agency would assign to the tranches that the bank would retain. Since the thin junior tranche is assigned a 1250% risk weight, the main issue is the treatment of the retained senior tranche.
Mizuho’s analysis of the transaction shows that the crux of the solution is deriving a Scenario Loss Rate (SLR) for the portfolio, which is the basis for the tranching of the trade. The protected tranches need to detach above the SLR, with the retained senior tranche receiving a risk weight equivalent to a securitised position with an equivalent single-A rating.
However, R2R might have perhaps been the exception to the rule. Bond explains: ‘’The AfDB is the most capital constrained of the MDBs. This led them to work with one of the major credit rating agencies to provide more space on their balance sheet to expand their lending without weakening their rating. Most MDBs are not capital constrained at this time and they have several other ways to expand their lending.’'
Looking ahead, tapping the rating agencies might not be a one-way street. Maurits Fliehe Boeschoten, senior advisor at FMO, concludes: “We avoid the rating agencies by setting up our own internal rating systems, although the choice of external or internal ratings will depend on investor preferences and sophistication. The position of the rating agencies is to some extent understandable, given the lack of data for emerging markets. We are aware of this and use alternative data, including benchmarking our portfolios to other jurisdictions.’’
Stelios Papadopoulos
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News
ABS
Some stabilisation
European ABS/MBS market update
The European and UK ABS/MBS markets saw some elements of stabilisation in the last few sessions of last week. Nevertheless, spreads continue to widen in both a very active secondary and a quiet primary space.
The secondary market saw its busiest week of 2022, with over €350m paper on BWIC and dealers reporting healthy bilateral activity as well. As the macro tone improved from mid-week on the back of hopes rather than expectations on Russia-Ukraine negotiations, ABS/MBS began to show some resilience and the pace of spread widening slowed.
Indeed, by Friday there was increasing evidence of an appetite to bid at wider levels. Overall, by the end of the week, generic spreads ended up 2bp-8bp wider on the week – a notably better performance than any previous week since the Russian invasion.
Meanwhile, primary once again saw a couple of pre-placed/private deals, alongside one public marketed deal – Shamrock Residential 2022-1. Unsurprisingly, the latter printed notably wider than last year’s deal from the same platform, but did see distribution across 15 unique investors; of which 52% were fund managers, 44% banks and 4% others, split 57% in the UK, 33% Europe and 10% other.
The primary pipeline currently contains two deals set to price this week – Italian consumer deal Brignole CQ 2022 and Spanish prime RMBS FT RMBS Prado X. Both contain some tranches due to be publicly marketed.
For more on all of the above primary deals, see SCI’s Euro ABS/MBS Deal Tracker.
Mark Pelham
News
Structured Finance
SCI Start the Week - 14 March
A review of SCI's latest content
ESG event this week
SCI’s inaugural ESG Securitisation Seminar is taking place in-person on 16 March at the London offices of Clifford Chance. The event will examine the role that securitisation can play in sustainable finance and the challenges that need to be overcome to achieve its potential.
For more information on the event or to register, click here.
Last week's news and analysis
Boosting the bottom line
Celebrating IWD: on the need for equal pay
Coordinating outfit
ESG advisors gaining traction
ESG seminar line-up finalised
Sustainable securitisation on the agenda
Expectation gap
European ABS/MBS market update
Growing presence
GLAS answers SCI's questions
Legacy Libor
Senate passes Libor act, but worries about adequacy of SOFR remain
Paying it forward
Celebrating IWD: on empowering the next generation of women
POS ABS prepped
Barclays backstops UK debut
Ratings furore
Industry pushback throws into doubt S&P CMBS ratings action
'Show, don't just tell...'
Celebrating IWD: on why women need more leadership role models
Test case
CDS market ponders Russian sanctions
'We all have a part to play'
Celebrating IWD: on attracting more women to leadership positions
For all of last week’s stories including ‘Market moves’ and ‘Risk transfer round-up’ click here.
SCI CLO Markets
CLO Markets is SCI’s new service providing deal-focused information on the global primary and secondary CLO markets. It offers intra-day updates and searchable deal databases alongside BWIC pricing and commentary. Please email Jamie Harper at SCI for more information or to set up a free trial here.
Recent Premium research to download
The rise of the ESG advisor - March 2022
ESG advisors are gaining traction in the securitisation market, as sustainability becomes an ever-more import consideration for investors and issuers. This Premium Content article investigates what the role entails.
CLO Control Equity - March 2022
CLO equity is back in vogue and is attracting attention for all the right reasons. As this Premium Content article suggests, for suitably prepared investors, taking a majority position can increase the benefits still further.
Stablecoin and securitisation - February 2022
Appropriate regulation of digital payment could pave the way for the issuance of securitisations in stablecoins. However, this Premium Content article argues that further standardisation across the blockchain ecosystem is needed for the technology to reach a critical mass.
US auto CLNs - February 2022
Santander’s recent auto CRT echoed those previously issued by JPMorgan Chase. This Premium Content article examines the similarities and differences between the transactions.
SCI Events calendar: 2022
SCI’s 1st Annual ESG Securitisation Seminar
16 March 2022, London
SCI’s 6th Annual Risk Transfer & Synthetics Seminar
27 April 2022, New York
SCI’s 3rd Annual Middle Market CLO Seminar
June 2022, New York
SCI’s 4th Annual NPL Securitisation Seminar
September 2022, Milan
SCI’s 8th Annual Capital Relief Trades Seminar
October 2022, London
News
Capital Relief Trades
Synthetic RMBS unveiled
Unicredit reveals capital relief trade
Details have been revealed of a significant risk transfer transaction that UniCredit and Fidelis finalized in December 2021. The synthetic securitisation is backed by Italian residential mortgages and is the bank’s first SRT to be backed by such exposures and its first with insurers.
The Italian lender structured the transaction under the ARTS (Asset Risk Transfer Sharing) program. The deal references a €600m seasoned portfolio of existing and performing Italian residential mortgage loans granted to private customers.
The transaction allows UniCredit to optimize the risk-return profile of the loan portfolio while sharing risk with Fidelis.
The synthetic RMBS coincided with the issuance of another ARTS deal in January (SCI 18 January). UniCredit, in cooperation with the EIB Group launched a financial guarantee that was backed by a €2bn portfolio of Italian SME and mid-cap loans, with the EIF guaranteeing the mezzanine tranche. Over the last six years, UniCredit's EIB resources for businesses in Italy have amounted to more than €4bn, with nearly 6,000 projects financed to date.
The deal was executed under the bank’s new plan called "UniCredit Unlocked". The 2022-2024 plan lays out a business model that aims for strong organic capital generation with increased shareholder distributions of at least €16bn for 2021-2024 via a combination of cash dividends and share buybacks while maintaining or exceeding CET1 ratios of 12.5%-13%.
Stelios Papadopoulos
News
Capital Relief Trades
Full stack guarantee launched
Millenium bank executes SRT
Millenium bank and the EIB group have completed a full stack financial guarantee. The transaction is the first such significant risk transfer trade under the European Guarantee fund (EGF) and will enable the originator to channel PLN4.2bn of financing to Polish SMEs.
Thomas Lupbrand, structured finance analyst at the EIF comments: ‘’The transaction is the first under the EGF where we securitised both the senior and junior tranche and, in this way, it maximizes the absolute capital relief you can get.’'
The EIB group is guaranteeing the whole stack including a PLN300m junior tranche and a PLN1.2bn senior piece. The tranches amortize pro-rata with triggers to sequential amortization and the deal lacks any replenishment or excess spread as stipulated by EGF terms (SCI 18 August 2021).
The European Commission approved the extension of the EGF to synthetic securitisations last year, but synthetics will continue to benefit from the programme only until the summer of this year (SCI 11 February). The EU gave the green light to the €540bn package of measures in 2020 to counter the economic challenges of the coronavirus pandemic.
Full cap stack SRTs won’t work for everyone since hedging the full stack is expensive and only makes sense with the EIF’s participation. Yet any decision to obtain a guarantee or retain the senior tranche will depend on the guarantee rate and the bank’s cost of capital (SCI 17 August 2020). The calculation of the latter considers the bank’s CET1 ratio, its pre-tax cost of capital and the 15% senior capital charge. If the bank can find protection for the senior tranche that is consistent with its cost of capital, then guaranteeing the senior makes sense.
Marcos Chazan, director, structuring at StormHarbour concludes: ‘’The senior and junior tranches of the Millenium deal are fully guaranteed which isn’t possible for synthetic securitisations with market investors. This makes the transaction the most cost-effective method to maximise capital relief efficiency.’’
Stelios Papadopoulos
Talking Point
Structured Finance
What makes an efficient CLO manager?
Phil Raciti, head of performing credit and a portfolio manager at Bardin Hill, explains the key attributes needed to be successful as a CLO manager
The CLO asset class operates within a sophisticated construct of arbitrage, leverage, and structural protections. Having navigated multiple recessions and the most significant period of issuer downgrade activity on record in 2020, the asset class has time and again emerged as a proven equilibrium of investment complexity and an elegant structural architecture.
In the current environment of earnings growth and low defaults – when equity returns are as strong as NAVs are high – it is more important than ever that CLO managers focus on efficiency. Well-researched investment theses and ongoing credit monitoring designed to offset embedded asymmetric risk of underlying CLO assets are fundamentals, but even the most sound credit processes will lead to some asset loss that was unprotected by the CLO structure. At Bardin Hill, we have built efficiencies in processes, communication, and systems to differentiate ourselves and strengthen our decision-making, all of which helps us drive performance.
As a long-tenured manager of CLOs of varied structures, asset characteristics, and liability execution, I leverage extensive experience as I construct and manage our portfolios, with a continual eye on efficiency.
All strategies executed by CLO managers are public. Every month, reams of data are distributed to investors detailing every trade, rating change, and basis point of risk movement. The data is parsed and analysed via public data feeds, with manager-style guides setting up monthly performance contests. There is no hiding as a CLO manager, as marks are current, mistakes emerge, and beauty contests are constant.
As such, a CLO manager must navigate a series of structural restrictions while utilising a limited playbook of tools to defend against potentially conflicting interests on behalf of investors. This structural burden is offset by the benefits of limited mark-to-market triggers and leverage driven returns. In all, the structures represent a fair compromise of logic and leverage that provides investors with a significant level of investment protection and transparency, while aiming to drive enhanced returns.
Embracing this level of transparency, a CLO manager is in the best position to understand underlying market conditions, drive foresight into future risk strategies, and hedge through positioning as system-wide risk builds. Transparency of the asset class, coupled with enhanced tools for large dataset analysis, is key to driving improved outcomes in CLO investing. At Bardin Hill we gain unique insight into competitor activity and can adjust positioning by utilising large analytical databases to construct CLO manager health dashboards, assisting us in our drive to make more informed decisions and allow us to better project future market conditions.
Active planning, hypothetical analysis, and preemptive trading are hallmarks of an efficient CLO manager. Foresight and active management, both in the traditional risk management sense and as a CLO technician, are equally important in terms of efficiency.
An efficient CLO manager predicts not only future market conditions, but also future CLO manager behavior, structural limitations, and rating agency sentiment. The manager considers when and how to lean into markets while maintaining enough structural cushion to risk position. The manager also utilises the CLO structure to drive returns and never allows the CLO structure to dictate risk management.
The Structured Credit Interview
CLOs
Choice offering
Rob Reynolds, md and head of CLOs at Pemberton Asset Management, talks to SCI about his new role and his vision for the company
Q: You joined Pemberton earlier this month (SCI 1 March). Can you provide an overview of the firm and the new CLO platform?
A: Pemberton was founded in 2013 by our managing partner Symon Drake-Brockman, who is still leading the business. At the time, the fallout from the financial crisis in 2008 led banks to prioritise investment-grade loans and shrink their balance sheets by moving away from quality companies operating in the middle-market.
Pemberton stepped in to fill this important gap left by corporate banks across Europe. Pemberton has since expanded to offer a range of alternative credit strategies, including working capital finance and a risk-sharing strategy.
The team got in touch with me last year asking if I’d like to support them on setting up a CLO platform. I’ve worked in the sector for more than 15 years and saw it as a natural fit for Pemberton – the company has all of the right systems, governance and investor relationships in place. CLOs are a growing market; they bring a slightly more liquid product into the Pemberton offering and help address growing investor demand for more choice.
Q: Talk us through what your new role will entail.
A: I’ll be leading on all aspects of setting up and running the CLO platform. One of my first priorities is to grow the CLO team here at Pemberton and we’re already working on recruitment. Once we have regulatory approval, the plan is to open a warehouse, start building the assets and then launch a CLO.
Q: How has the pandemic impacted the CLO sector?
A: The CLO sector was remarkably resilient during the pandemic. We’re beginning to return to normal life now, but there remains a degree of volatility in the market, due to the impact of rising energy prices and the ongoing war in Ukraine. Naturally, it is vital to thoroughly analyse and understand any credit dimensions to this.
Q: In terms of moving forward, how would you describe Pemberton's vision for 2022?
A: The significant funding gap, which has grown in the wake of the GFC, has led to a significant and increasingly varied opportunity for us to support businesses with credit solutions. Our focus is to continue delivering leading alternative credit strategies for investors and borrowers.
We’ve already announced our risk-sharing strategy and this new CLO strategy over the past few months – so our vision this year is to establish these strategies. We continue to see strong demand from investors for our innovative strategies and the alignment between firms and investors on making sustainability a priority is greater than ever, an area where Pemberton is particularly strong and focused on.
Angela Sharda
Market Moves
Structured Finance
IGLOO SME scheme unveiled
Sector developments and company hires
The EIF is supporting the Italian Guaranteed Loan Origination Platform (IGLOO), a new state-backed initiative that aims to provide €170m in opportunities for growth and financing for at least 800 SMEs and mid-caps in Italy. Promoted by Gruppo MutuiOnline and Gruppo NSA, the platform has a particular focus on criteria relating to climate transition and environmental sustainability.
The EIF will participate via a €50m investment in a securitisation operation, with the remaining €120m to be provided by partners in the initiative and Italian institutional investors. The securitisation was structured by Société Générale on a portfolio of loans originated by credit brokerage firm NSA SRL and NSA SpA, a company that manages MCC and SACE guarantees.
The loans are provided by Centro Finanziamenti and managed by Quinservizi, a subsidiary of Gruppo MutuiOnline. Banca Finint will act both as sponsor bank and master servicer.
The EIF will use its own resources to directly acquire senior and/or mezzanine securities issued by the platform. The project is the first securitisation initiative in Italy that is intended to create an alternative financing channel via a ramp-up structure over a one-year horizon.
NSA will use the platform to process part of its €37.5m earmarked for green financing, governed by criteria relating to climate transition and environmental sustainability. Furthermore, each loan in the securitised portfolio will be covered by the public guarantee of the Guarantee Fund for SMEs, as well as the criteria for climate action and environmental sustainability defined by the EIB and applied by the EIF.
In other news…..
EMEA
Lakemore has announced Arno van den Heiligenberg as its new md and head of business development for Europe. The newly created position builds upon the firm’s global expansion, having already established its presence in the US with the opening of its Phoenix, Arizona office last year. Heiligenberg joins Lakemore from UBS Wealth Management, where he most recently stood as its global co-head of investment fund sales. With more than twenty years of experience in expanding the businesses of global financial institutions, Heiligenberg will be responsible for developing relationships with clients across Europe, and offering European firms access to US CLO investment opportunities.
North America
Greystone has announced several new senior hires in latest bid to expand its CMBS platform and become a leading provider of conduit loans for the CRE market. Russ Avery will join as head of structuring for the CMBS platform, having previously served as a director in CMBS at Deutsche Bank where he focused on conduit risk pricing and bond structuring across all conduit and SASB transactions. Avery will be based in New York and will be joined by three new additions to the CMBS team in the Charlotte, North Carolina office. Tricia Baker, Clark Andersen, and Chris Troutman will join Greystone’s CMBS platform as mds - with Baker serving as head of transaction management - from Alston & Bird, CCRE and Regions Bank respectively.
Market Moves
Structured Finance
Barrow Hanley closes inaugural CLO equity fund
Sector developments and company hires
Barrow Hanley Global Investors has closed on its inaugural CLO equity fund – the Barrow Hanley CLO Fund I LP. The fund will be managed by the existing alternative credit team and follows the aims of the firm’s strategic partner, Perpetual Limited, to expand the product offering at Barrow Hanley. Perpetual, alongside employees at Barrow Hanley, have invested 35% of the fund’s equity at closing. Following on from the closing of Barrow Hanley’s first CLO fund, Perpetual expects to issue a number of CLOs over the course of the year.
In other news…
North America
Briarcliffe has appointed Collis Klarberg as md, as the firm seeks to expand its business amid recent growth in the private lending market. The private credit industry veteran will join as a fundraising manager, and will be responsible for leading sales coverage of institutional investors across the Midwest and New England. Klarberg joins from First Avenue Partners where he served as md on its distribution team, having spent more than a decade working on private credit strategies. The placement agency hopes Klarberg’s expertise will help connect investors to the firm’s strategies.
Ropes & Gray has welcomed a new partner to its finance practice in New York, Christopher Poggi. Joining the global law firm’s team of 500 based in New York, Poggi will work alongside partner Patricia Lynch and others on the team that advises on complex financings and securitisations to clients worldwide. Poggi brings more than 20 years of experience in structuring and negotiating different securitisation transactions, with particular interest in whole business securitisations and notes backed by portfolios of intellectual property. Joining the firm from Paul, Weiss, Rifkind, Wharton & Garrison, where he served as counsel, the firm hopes Poggi’s expertise will bolster its finance counsel offering to clients.
Market Moves
Structured Finance
Equitable Holdings subsidiary to acquire CarVal Investors
Sector developments and company hires
Equitable Holdings has announced the acquisition of CarVal Investors by its subsidiary, AllianceBernstein. The agreement to acquire the global private alternative investment manager with US$14.3bn in AUM falls in line with Equitable Holdings’ strategy to further its differentiated business model and increase returns. CarVal focuses on opportunistic and distressed credit, as well as renewable energy infrastructure, speciality finance, and transportation investments. US$750m of general account assets will be allocated into CarVal strategies from Equitable Holdings, and upon completion the transaction will increase AllianceBernstein’s private markets platform to almost US$50bn in AUM. The deal structure will not impact on Equitable’s capital position, and the transaction is expected to close in the second quarter of this year.
In other news….
North America
Mitsubishi UFJ has recruited a new md and head of US esoteric ABS, Yezdan Badrakhan, as the firm broadens its securitised products business. Badrakhan will report to international head of securitised products, Tricia Hazelwood, and will be stationed in its New York office. He joins the firm from Morgan Stanley, where he launched the firm’s structured products capital markets’ transportation business, and has over a decade of experience focusing on esoteric asset classes. In the new role, Badrakhan will work to continue the expansion of MUFG’s esoteric ABS business, diversify the firm’s reach to new asset classes, while developing its ABS underwriting platform.
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