Contents

ABS

Opportunity knocks

Debut RPL ABS could be first of many

The first publicly rated European unsecured reperforming loan ABS hit the market in April. With Covid-induced moratoriums limiting the supply of non-performing loans, further such transactions could emerge, as debt purchasers with excess liquidity seek to deploy capital.

Dubbed Wolf Receivables Financing, the transaction represents Lowell Financial’s debut public securitisation and is also the first UK RPL ABS (see SCI’s Euro ABS/MBS Deal Tracker). Lowell intends to use the proceeds from the securitisation, alongside existing funding and sources of cashflow, to support its recent strategic acquisition of Hoist Finance UK.

Project Wolf comprises a highly granular underlying portfolio of more than 356,000 UK reperforming receivables, accounting for £315.4m in GBV and £180m in early repayment charges, acquired and serviced by Lowell. The receivables – which were acquired between 2017 and 2021 - are made up of various underlying product types, including catalogue credit (accounting for 33.2% of the portfolio), credit cards (31.4%), personal unsecured loans (14.2%) and telecommunications service agreements (13.6%). The remaining 7.3% comprises utility bills, store cards, overdrafts and mail orders, while a further 0.8% is categorised as ‘other’.

The £100.6m senior notes were preplaced and the approximately £79.97m in junior notes were retained by the sponsor, although it does intend to re-offer 51% of the junior notes at a later date. The transaction saw significant interest from investors, which benefited from extensive comparable accounts data provided by Lowell. The firm has been operational in the UK for more than 15 years.

“The investors were quite comfortable with the business plan because they could see the historical performance was very reliable over different economic cycles. The performance was very consistent for these books,” says Linh Tran, vp at Alantra, which acted as sole arranger on the deal.

The emergence of RPL ABS over the last five years comes as the debt purchasing industry enters the mainstream with the evolution of the European non-performing loan market. “It had never been presented before and for investors who were unfamiliar with the industry and didn’t really realise the level of predictability around the cashflows that there are before this,” adds Edwin Harrap, director at Alantra. “It’s probably a testament too to the increasing level of sophistication in the debt purchase industry as it has matured, and competition has increased, which has led a keenness in the industry to innovate and discover new ways to monetise accounts.”

Lowell also demonstrated a strong commitment to ESG to its counterparties, placing high value in its Trust Pilot Score, amid lingering concerns about greenwashing across the debt servicing industry. “With those that are less familiar with the industry, there can be a negative view around the debt purchase sector, and I think Lowell did a really good job at informing rating agencies and investors,” notes Harrap.

“In this case, the credibility of the sponsor is very important too,” explains Francesco Dissera, md and head of securitisation at Alantra. “Across Europe, there are very few sponsors like Lowell, who have the track record and the historical data to select the portfolio to present to the rating agencies. At the same time, you see a lot of NPL securitisations where a new servicer is appointed and while they may be able to reperform some of the NPL it’s managing, they probably don’t have the same experience, historical data or ability to provide sufficient information to rating agencies.”

Regarding the absence of similar transactions in the market, he suggests that rating agencies historically have been sceptical about unsecured NPL transactions. “This is the first time they were officially presented in a transaction, and it took them some time to be comfortable. But because we have a very strong client with very strong data, and the ability to extract that data, I think they were able to.”

Whether similar transactions come to the market in the future depends on whether other players can provide sufficient historical data and have a flexible system, according to Dissera. “We expect there to be the potential for maybe three or four similar opportunities across continental Europe, but we are not sure if these are going to be imminent.”

Harrap believes there is appetite for such transactions. “We’ve had a few inbounds from people who think it is interesting. Probably one of the catalysts for this increase is due to Covid moratoriums leaving a limited supply of NPLs, meaning some of the debt purchasers have excess liquidity at the moment and I think as the opportunity increases to deploy capital, they’ll start to use this.”

He continues: “I think the core skillset of Lowell and debt purchasers in general is being able to take non-paying accounts and turn them into paying accounts – and then this transaction allows them to monetise early. The payment plans are quite long and are generally up to 10 years, which allows them to accelerate a significant part of the cashflows and release funds at an attractive cost of funding.”

Harrap indicates that northern Europe is where collections are more focused on payment plans and, therefore, that is likely to be where the most suitable accounts are to be found. He concludes: “There would also need to be sufficient volumes, so it’s the larger northern European economies - like the UK, Germany and the Nordics - that are the most likely jurisdictions for more similar transactions.”

Claudia Lewis

CLOs

Migrating transactions

'Seamless' switch for CLO domiciles

The switch from the Cayman Islands to alternative domiciles, following the European Commission’s listing of the jurisdiction on the EU AML list, appears to have been painless for most CLOs. This Premium Content article investigates.

The European Commission’s blacklisting of the Cayman Islands earlier this year has triggered the migration of many CLOs to alternative domiciles. Overall, the switch has been fairly straightforward, with Jersey appearing to be the jurisdiction that has benefitted the most.

“The hype around the issue was a cloud that we thought was going to hover over the CLO space, but it was just that - hype. The switch to the alternative jurisdictions has been seamless – people we have dealt with in other jurisdictions have made the solutions easy, with minor wrinkles,” observes Joseph Beach, partner at Cadwalader.

Following a European Commission proposal, on 21 February, a Commission Delegated Regulation was published that placed the Cayman Islands on the EU’s Anti-Money Laundering (AML) ‘blacklist’, along with eight other jurisdictions. Typically, the Cayman Islands was popular among CLO managers, due to its attractiveness as an offshore jurisdiction.

The EU’s AML blacklist is a list of countries deemed ‘high risk’ under the AML Directive – for example, those whose AML/combatting the financing of terrorism regimes have strategic deficiencies that are perceived to pose a significant threat to the EU’s financial system.

Since February, the Maples Group – for one – had, at the time of writing, incorporated 41 new Jersey CLOs and completed 16 continuations of Cayman CLOs into Jersey, with another seven continuations in its pipeline. “Jersey has been widely accepted as the leading alternative jurisdiction solution for US CLO issuers looking to market deals to investors in the EU, and continues to attract interest from arrangers and managers of structured finance products - with over 90 CLO transactions on track to either incorporate in, or to migrate to, Jersey in 1H22,” claims Scott Macdonald, global head of finance at Maples and Calder, the Maples Group's law firm.

Jersey is seen as a unique and attractive jurisdiction, given that it has a zero-tax rated regime and has a long-standing regulatory policy for securities issuance. Further, the island is an OECD territory but outside the EU, and has availability of familiar legal structures and many experienced professionals in the financial services sector.

Macdonald notes that the Jersey Regulator and Jersey Companies Registry continue to provide efficient and reliable services, which also supports the smooth closing of CLO transactions. The Maples Group's Cayman team continues to lead on communications with transaction counterparties to support the Jersey team and to provide time zone coverage. In addition, they appoint a Cayman-based director to the board of each Jersey CLO issuer to ensure that they have a signatory available in the New York time zone.

He adds: “The market has responded positively to the use of Jersey as an alternative jurisdiction for CLO transactions and we expect the closing of recent notable transactions will inspire further confidence in the future use of Jersey by CLO and other structured product market participants.”

Although Bermuda has been promoted as an option for CLO issuers, Jersey is better known as a securitisation jurisdiction that has historically catered for the speed of incorporation required by that market. Bermuda is better known as an insurance jurisdiction with a multi-stage incorporation process. Jersey was already home to a few US CLOs and has also been used in the past for synthetic securitisations.

The time zone bridge was the biggest issue, according to Beach. “In addition, there are legal quirks in each jurisdiction, which have proven to be insignificant. For example, Bermuda requires some additional filings for warehouse loans, which took a while to solve. But the council worked with us to help solve this.”

Meanwhile, Jersey has specific rules governing security interest over Jersey-law documents, but those are insignificant in the CLO process and so have largely been ignored.

Indeed, the process of migrating CLOs from the Cayman Islands appears to have been relatively straightforward. Gregg Jubin, partner at Cadwalader, explains that the terminology and people may be different, but overall there are no significant issues to overcome. He says that this process could have been a lot more problematic, but both governments have stepped up to make it as seamless as possible.

Jubin claims: “They are allowing these entities to not have to reform and keep their existing governance forms and exist in these new jurisdictions. Overall, the process has been easy as it relates to CLOs.”

Another jurisdiction that could benefit from the Cayman blacklist is Luxembourg. On 9 February, the Luxembourg Parliament passed an amendment to its securitisation law that broadens the sources of funding for securitisation products in Luxembourg and, importantly, now permits active management of debt portfolios.

Looking ahead, Beach says he can foresee a scenario where CLOs switch back to Cayman – should it come off the blacklist - as it continues to have the best infrastructure for the deals. He concludes: “We have done a handful of Delaware-only deals, all at the request of senior debt investors. It raises tax concerns and puts constraints on selling non-investment grade deals. I am unsure whether this will indicate a wave of deals for the future.”

Angela Sharda

Capital Relief Trades

Risk transfer reboot

Synthetic CRE issuance picks up

Significant risk transfer transactions backed by commercial real estate loans are finally picking up following the finalization of two trades this year and another one by Credit Agricole that is still pending. The clarification of post-Covid trends have proved decisive in terms of informing investor approaches to due diligence, coupled with a search for an inflation hedge amid a rising inflationary environment.  

CRE SRT issuance can be broken down into three waves. The first wave occurred in December 2017, with the completion of three trades by Santander, Lloyds, and Barclays. The second wave ensued the next year, with the finalisation of another trio of deals from Santander, NatWest, and Lloyds, while Raiffeisen and Lloyds accounted for the third wave in 2019.

However, the Coronavirus crisis brought this segment of the market to a halt by posing two challenges. First, payment holidays and reduced rent collections constituted a short-term challenge, given that the value of CRE loans resides in those rent payments.

Yet the greatest concern was the long-term impact of the crisis for collateral values, assuming a long-term reduction in the demand for office space. The reduction in market rates for rents implies lower debt service coverage and higher LTV ratios, which in turn lowers collateral values. The crisis proved to be a short-term challenge which is how investors see it as well.

Luca Giancola, portfolio manager at Cairn Capital explains: ‘’the underlying loans in most synthetic CRE SRT transactions will typically feature LTV and interest coverage covenants that protect the lender, and breaches can result in income being diverted to amortise the loan. In times of perceived temporary stress, covenant breaches can be temporarily waived or reset, often in exchange for some deleveraging, and this typically wouldn’t impact the SRT transaction as a credit event. The same can be said of short-term maturity extensions where loan maturities coincide with the stress.’’

He continues: ‘’However, where stress is perceived to be more severe in nature or the result of permanent value decline, then it’s harder as lenders will be forced into more challenging restructures or enforcement and that’s typically when we see credit events impact the SRT transaction. Covid was generally perceived as a temporary stress, but for some property types the stress was severe and coincided with other factors.”

Barclays executed a synthetic securitisation that was backed by commercial real estate loans in 2020 but that was mixed with corporate exposures (SCI 23 December 2020). The bank that completed the first post-Covid capital relief trade to be backed solely by commercial real estate assets was Bank of Montreal via its Boreal programme last year (see SCI’s capital relief trades database). The Canadian lender followed up with another Boreal deal this year. 

Consequently, the market is now back, and this is mainly due to the clarification of the post-Covid trends. The main post-Covid trends in the securitised CRE space are several, but in the context of synthetic securitisations they can perhaps be narrowed down to two.

According to research by Scope ratings on a sample of 69 CRE loans, valuations have generally increased, mainly driven by yield compression but retail is the exception, with yields wider as valuers have a bearish outlook on the sector. Operating performance across sectors has visibly diverged. Industrial is performing well, with 6% median income growth although hospitality (-36%) and retail (-20%) strongly underperform. Offices on the other hand are mixed with prime location no longer offering a guarantee of success. 

Second, the real estate sector has become exposed to the ability of sponsors to manage tenant rollovers. The average unexpired lease tenor has reduced by four months on average, with this being more intense in the office sector (9.4 months). Logistics is the only sector which has consistently succeeded in re-letting at higher levels. Retail and hospitality are approaching a refinancing wall, with Scope noting that lender appetite for refinancing retail and hospitality will be tested in 2023 and 2024.  

Florent Albert, director, structured finance at Scope ratings comments: ‘’The real estate sector is becoming an operational business. Leases are much shorter now for all real estate asset classes. Shorter leases means that assets must be maintained in a good state to regularly attract new tenants which increases CAPEX. Financing terms may address these risks by embedding letting performance covenants like debt yield or occupancy metrics.’’

He continues: ‘’when it comes to SRT transactions, the low portfolio granularity compared to other ABS exposes investors to significant risks if they don’t carefully select their exposures. The last point is particularly true for hospitality, retail, and offices. On portfolio selection, you need to know the business plan of the loan sponsors and carefully assess jurisdiction specificities in terms of CRE laws and regulations such as tenant eviction laws and planning regulations.’’

Indeed, deep portfolio dives is what investors are counting on. According to a CRE SRT investor, ‘’there’s a pickup in the market but we are still talking about a handful of transactions driven by idiosyncratic objectives, including banks’ general preference to grow the business or keep their risk exposure within agreed limits. One key change two years after the Covid crisis is that there is now more visibility on the expected performance of the underlying loans and properties backing those loans.’’

He continues: ‘’Banks have gone through their usual re-rating processes with updated property valuations. Most underlying loans will give lenders the right to revalue the assets on an annual basis. During the Coronavirus crisis there were restrictions imposed on landlords’ ability to collect rents, most of which have now normalised, giving better visibility on the borrower’s ability to service the debt.’’

Despite challenges with retail, it still features in portfolios, but it will either be a small portion of the pool, or it will require plenty of transparency. Residential has performed well to date including buy to let and multifamily housing. In fact, Bank of Montreal’s Boreal transactions primarily referenced residential assets.

Granular investments was heavily involved in both the first Boreal transaction that was executed last year and this year’s deal. Giuliano Giovannetti, md at Granular investments notes: ‘’Canada has good demographics, and the portfolio performance of the Boreal transactions was strong but perhaps the main difference with European deals that might have made it work better in a post-Covid environment was the high granularity and the fact that it was primarily backed by residential real estate such as condominiums.’’

Similarly, Richard Sullivan, md at Granular investments adds: ‘’you can think of it as akin to the multifamily units that you find in Germany and Scandinavia involving blocks of apartments.’’

However, the picture isn’t that rosy for offices. As with Scope ratings, investors note that some questions linger over these properties. Still, portfolio visibility will again prove crucial.  

The same CRE SRT investor explains: ‘’from our perspective, we want to have visibility on what type of tenants are in the building and the associated lease terms. The tenants will still be obligated to pay lease payments in accordance with their contractual obligations, even if they no longer need the same floor space in situations where a lot of their employees continue to work from home. So, long dated leases to blue chip tenants remains a secure cash flow to lend against.’’

Finally, another challenge of the post Covid period has been concentration risk. Benedetto Fiorillo, senior advisor at Bayview concludes: ‘’concentration risk remains a key issue for banks, and this is something that was highlighted by the European Central Bank. This coincides with quite tight spreads especially for European legacy real estate. Markets should reprice yields to adjust for a risk of a downturn in a higher interest rate environment.’’

However, not all investors have the same attitude towards concentration risk. In fact, for some it’s not an issue at all if they are able to get the required level of disclosure and carry out a loan-by-loan analysis.

Stelios Papadopoulos

Structured Finance

SCI Start the Week - 6 June

A review of SCI's latest content

Last week's news and analysis
Crash landing
Aircraft ABS market papering over the cracks, say critics
Fit for purpose?
ESAs urged to revive securitisation market
Ramping up
Santander adds ramp-up feature in new SRT
Risk transfer comeback
Santander completes US auto SRT

For all of last week’s stories including ‘Market moves’ and ‘Risk transfer round-up’ click here.

SCI CLO Markets
CLO Markets provides 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 David McGuinness at SCI for more information or to set up a free trial here.

Recent premium research to download
Portfolio optimisation and ABS - May 2022
The trend of banks rationalising their business models continues apace across Europe. This Premium Content article explores the role of securitisation in their portfolio optimisation efforts.
Green SRT challenges - May 2022
A green synthetic securitisation framework remains lacking, despite the current regulatory focus on ESG. This Premium Content article explores why.
Aircraft ABS turbulence - April 2022
The fallout from the Ukraine crisis is likely to affect the entire aircraft ABS market, rather than simply those deals with exposure to Russian assets. This Premium Content article outlines why the sector is bracing for a bumpy ride.
Marking 25 Years of cat bonds - April 2022
With the climate threat menacing ever more, is the catastrophe bond market set to see exponential growth? This Premium Content article investigates.

SCI events calendar: 2022
SCI’s 4th Annual NPL Securitisation Seminar
27 June 2022, Milan
SCI’s 8th Annual Capital Relief Trades Seminar
20 October 2022, London
SCI’s 3rd Annual Middle Market CLO Seminar
November 2022, New York

Structured Finance

Goodbye convention?

Demand for inclusive credit scoring intensifies

Institutional investors have joined the charge of securitisation professionals demanding more inclusive credit scoring methodologies, following the SFA’s call for the use of alternative credit scores amid enduring concerns over the wealth inequality gap in the US (SCI 6 April). A new study, commissioned by VantageScore Solutions and conducted by FTI Consulting, finds that institutional investors also desire more transparency among credit scoring models used to underwrite the loans that collateralise the securities they purchase.

"This research shows that investors want credit scores to keep pace with demographic shifts and advances in technology and data innovation – without lowering risk standards," comments Silvio Tavares, president and ceo of VantageScore.

The vast majority (93%) of investors with exposure to ABS and RMBS polled in the study demonstrated interest in considering alternative credit scoring methodologies, with 74% believing conventional credit scoring to be outdated. Additionally, 85% acknowledged the importance of developing scoring models specifically for the purpose of including underserved communities across the US.

Of the investors polled, 58% reported a need for heightened transparency over the calculation of credit scores. Indeed, increasing transparency around ABS transactions can broaden interest and aid investor confidence further, with 60% of investors citing transparency as a critical consideration when selecting individual ABS investments.

Despite the research showing low enthusiasm for conventional credit scoring methods, investors continue to be reliant on them, as 86% expect these methods to be strong predictors of ABS outcomes. Nevertheless, the prevalence of these conventional scoring methods is beginning to change as more investors are becoming interested in the financial and ESG opportunities in the inclusion of the 50 million traditionally ‘unscorable’ consumers.

ESG generally holds growing importance for investors, as 79% agree that environmental, social and governance factors play a large role in their decisioning, with most expecting this to only grow in the future. However, 73% of the total reporting investors expressed concern over the lack of clarity in terms of defining and measuring ESG across consumer assets.

At present, a large majority of investors are interested in seeing how alternative credit models incorporate ESG factors. The social responsibility element is a primary area of concern for ABS investors in ESG, and 85% of investors believe it is important to develop models which explicitly incorporate it.

For the study, FTI conducted 11 in-depth interviews with ABS investment specialists – including investors, issuers and rating agencies – followed by an independent, quantitative online survey of 333 global institutional investors with ABS exposure who represent an aggregate sum of US$47trn in AUM. The research was undertaken during 2H21.

Claudia Lewis

Capital Relief Trades

Fannie's six

GSE prints 6th CAS deal of 2022

Fannie Mae has priced a $754m CAS REMIC, its sixth such transaction of the year to date, designated CAS 2022-R06.

The bookrunners were Bank of America and Nomura. Co-managers are Amherst Pierpoint, Barclays, Citigroup and Credit Suisse.

The reference pool consists of 83,000 single family mortgages with an unpaid principal balance of $25bn. It is a low LTV deal, with ratios of 60.01% to 80%, all of which were acquired in June and July of 2021.

There are four tranches in the deal. The $332.5m M1-1 is rated A-/BBB+ and was priced to yield 1m SOFR plus 275bp. The $249.375m M1-2, rated BBB-/BBB-, yielded 1m SOFR plus 385bp, the $90m B1-1, rated BB-/BB, yielded 1m SOFR plus 635bp, while the $82m B1-2 was rated NR/B- and yielded 1m SOFR plus 1060bp.

The GSE retains a portion of each tranche, and the full first loss tranche.

Simon Boughey

Structured Finance

Doing the right things

Mark Davies, md, BCMGlobal Mortgage Services, answers SCI's questions

Q: How and when did BCMGlobal become involved in the securitisation market?
A: BCMGlobal services £3.2bn of securitised loans, totalling 23,000 borrowers, across circa 25 portfolios and 10 securitisation programmes. We act as a standby servicer for £7.1bn of securitised loans for 17 clients across 47 transactions. Our loan portfolios are domiciled and secured in the UK and Ireland.

The company has operated as a third-party loan servicer since the mid-1990s and as a servicer and standby servicer for securitisation and structured finance deals for some 25 years. The firm was originally owned by Guardian Royal Exchange, but it was sold to Crown Northcorp in 1999 and then to Forum Partners.

In 2014, it was acquired by Capita and renamed Capita Mortgage Servicing. In 2017, Link Group ASI purchased the business as part of its acquisition of Capita Asset Services and the firm was again renamed BCMGlobal in 2019.

We service the whole spectrum of mortgage loans and our clients are both originating lenders and closed-book investors.

Q: Can you explain what BCMGlobal’s ‘creator to trader’ model is?
A: The creator to trader model supports new lenders or originators of new loans and mortgages as they launch to market, mature and extend their product base and expand their market reach. We then work with them to support their funding models as they grow, refinance, trade or securitise the loan portfolios. We can help new lenders with limited experience of servicing get to market at a speed they might not achieve independently.

The main driver behind establishing this model was a recognition of the need to support the growing number of new lenders entering the market, as well as funders/investors looking to finance new players/entrants and who seek participants with experience, pedigree and track record in the sector to minimise their risk and exposure and to support nascent businesses. This is bolstered by our deep experience of servicing and banking operations, capital markets reporting requirements and sector-wide stakeholder understanding - from legal contracts to portfolio due diligence and rating agency requirements.

Over the last five years, we have worked with and launched 10 new players to market, supporting their operating models, funder due diligence, rating agency and investor roadshows. Ultimately, we are seen by our clients’ funders as a risk mitigant for operating, conduct and technology risk throughout the mortgage lifecycle.

Q: What does BCMGlobal’s dynamic risk management service entail?
A: All clients have an individually tailored Client Servicing Manual, which defines servicing activities, delegated authorities and responsibilities that can be amended and updated, outside of the servicing contract as market conditions or loan performance and regulations change. Portfolio buy-to-let loans, for example, are given the same proactive management as commercial property loans and performance-managed via a ‘watch list’ operating model. This allows any issues to be documented, loans to be monitored and reported specifically to minimise decision-making delays and thereby optimise recoveries.

Q: What role does data play in the service you provide your clients?
A: Granular, loan-level data is provided to all clients for the purposes of: risk management; performance modelling, including loss-given default and probability of default; cashflow forecasting; due diligence; credit reference agency and regulatory reporting; central bank reporting; and ESMA file submissions. Analytic information - while always part of risk modelling - will undoubtably continue to support collection and recovery strategies and to help identify and monitor hardship, vulnerability and forbearance for either servicing or regulatory purposes.

Q: How did BCMGlobal help clients manage Covid-related payment holidays/forbearance in their portfolios?
A: Responding to changing requirements and advice/guidance required multi-disciplined teams to collaborate to design, define and document new processes, letters and all agents’ scripts. Change and IT teams were required to specify, develop, test and launch new software in a period of weeks when ordinarily the process would take months. Additionally, specific reports for internal performance and activity monitoring were implemented for clients and regulatory purposes.

Q: Which challenges has Libor transition posed to your clients and how have they been overcome?
A: Generally, delayed decisions and a lack of clarity in guidance and implementation by regulators resulted in undue time pressures and efforts to inform and communicate with borrowers. For structured transactions, the legal and approval processes required slowed the decision-making process and placed operational pressure with respect to communicating and implementing new, alternative reference rates. As such, focusing on treating customers fairly and giving due notice for regulated borrowers was critical.

Q: In which ways does BCMGlobal differentiate itself?
A: We represent and balance the regulatory brand of our clients with their regulatory responsibility to their borrowers. We are the custodian of the interests for all the stakeholders in the loans we service.

Indeed, balancing the client need with the borrower outcome is a critical skill and vital operational responsibility. For our clients, their borrowers and our staff, we aim to do the right things, the right way, for the right reasons.

Q: What is your outlook for the securitisation servicing sector?
A: Depending on global market dynamics, the potential for refinancing existing funding structures and warehouse lines will mean potential changes to servicing opportunities.

Current inflation and rising interest rates have not been experienced by a generation of originators, investment bankers and borrowers. Rising interest rates represent an opportunity for higher returns for investors, but are a threat to the financial performance of transactions. Against this backdrop, collections and arrears management skills could potentially come to the fore but in a regulatory climate not previously experienced.

It is possible that some of these headwinds may be offset by the wage increases of home-owners and the increased savings some may have amassed during the pandemic. While other investment returns are impacted by inflation and market tensions, property remains a solid investment class and UK house prices - despite the comments of many - have been remarkably resilient and appear to be robust.

Finally, the UK FCA’s borrowers in financial difficulty (BiFD) project - combined with possible affordability issues - will undoubtably have implications for servicers and stakeholders alike, as processes, data collection and reporting will be required to change.

Corinne Smith

Structured Finance

Landmark Hong Kong cat bond closed

Sector developments and company hires

Peak Re has closed a US$150m 144a catastrophe bond via Black Kite Re, marking the first-ever such deal issued by a Hong Kong special purpose insurer. The cat bond is also expected to be the first to utilise the Pilot Insurance-linked Securities Grant Scheme introduced by the Hong Kong government last year (SCI 4 May 2021).

As part of the transaction, Peak Re has entered into a retrocession arrangement with Black Kite Re, providing the company with multi-year protection against typhoon risk in Japan. The deal attracted significant investor interest and was upsized by 100%.

GC Securities acted as structuring agent and bookrunner, while Mercer Investments (HK) acted as advisor and co-manager with respect to qualified Hong Kong investors.

In other news…

EMEA

DWS Group has appointed Stefan Hoops as its new ceo, following the resignation of Asoka Woehrmann. The news heeds investigations into the firm’s operations in Germany by the financial watchdog BaFin and in the US, by the US SEC, after the former DWS head of sustainability allegedly made claims the firm had sold investments as more sustainable than they were. While DWS has denied the greenwashing allegations, Woehrmann has agreed with the firm to resign at the end of its Annual General Meeting on 9 June, with Hoops taking over the role of ceo effective from 10 June. Hoops joined Deutsche Bank in fixed income sales in 2003 and takes on the new role, having most recently served as head of Deutsche Bank’s corporate bank, covering all of its corporate and client activities.

Jefferies has appointed Mark Collier md and EMEA head of securitisation. He was previously cio EMEA ABS and residential financing and co-head of ESG for global spread products at Citi, which he joined in September 2006. Before that, Collier worked at Deutsche Bank and Linklaters.

North America

Leucadia Asset Management has entered into a strategic relationship with credit opportunities investment group, Pearlstone Alternative. The transaction will also be accompanied by Leucadia providing seed capital and distribution services to Pearlstone. Leucadia hopes partnering with the 2021-founded fundamental credit investments and special solutions-focused Pearlstone will open up access to European credit investment opportunities.

Vida Capital welcomes Jeffrey Zinn to the firm in New York as md in private credit. Zinn joins the firm after spending four years serving as head of business development for the Special Assets Fund at Flexpoint Ford, and brings more than 27 years of industry experience to the role. In his new role, Zinn will focus on supporting sourcing, direct lending, esoterics, and private credit transactions by driving strategic business partnerships, and will report directly to senior private credit md, David Gussmann.

Structured Finance

Aon hires new strategic growth leader

Sector developments and company hires

Aon has named Joanna Parsons as strategic growth leader of UK capital advisory within the firm’s reinsurance solutions business, reporting to Ben Love, UK strategic growth leader for reinsurance solutions. In her new role, Parsons will help clients to understand the value of different growth, capital and reinsurance strategies, including in the securitisation space. Based in London, Parsons joins Aon from Claypole Partners, where she was founder and director, advising firms on strategic planning, process improvement and investor relations in the context of sustainable business growth. Before that, she held senior roles at ABN AMRO, HSBC and RBS.

In other news….

EMEA

Connor Daly has been appointed as the new CIFC head of European credit in its growing London office. Daly will join CIFC to oversee its European investment business, serving as md and senior portfolio manager. He will focus on expanding the firm’s existing European corporate credit investment platform, and will report directly to CIFC ceo and cio, Steve Vaccaro. He marks the latest hire to its 2018-opened London office as the firm continues the expansion of its European operation, and joins CIFC from Onex Credit where he operated as head of European cedit.

HIG Bayside Capital has promoted Mathilde Malezieux to md. Malezieux has over 16 years of investment banking and distressed investment experience. She previously worked at Nomura where she focused on European senior and mezzanine debt investments.

Howden Group has acquired TigerRisk Partners, a risk, capital and strategic advisor to the global insurance and reinsurance industry. The transaction significantly enhances the scale and depth of Howden’s reinsurance and capital markets offering and creates a much-needed fourth global player in the reinsurance market.

Leadenhall Capital Partners has promoted Lorenzo Volpi to deputy ceo. Volpi joined the firm in July 2010 from Aon and has been leading its business development function since then. He will maintain his responsibilities as head of business development and will attend some of Leadenhall’s governance bodies, including the management board and valuation and reserving committee.

Richard Sinclair has set up shop as a securitisation and structured finance advisor, advising financial institutions and corporates in issuer or arranger roles regarding structuring, management and refinancing of transactions. Based in Paris, he was previously md, securitisation and global co-head of conduit management and funding at Crédit Agricole. Sinclair’s involvement with ABCP began in November 1996 as a senior securitisation structurer at Crédit Lyonnais. Before that, he worked at HSBC and Geodis.

Dagmar Kent Kershaw is set to assume the role of chair of the board of Volta Finance, following the retirement of current chair Paul Meader – who has been a board member since 2014 - at the end of July. Kent Kershaw is currently a non-executive director of the company and chair of its risk committee. Following her promotion, she will also assume the role of chair of the company’s nomination committee, while the risk committee will be dissolved. Additionally, the Volta Finance board has appointed Yedau Ogoundele as an independent non-executive director, with effect from 1 July. Ogoundele has over 25 years’ experience in financial markets, developing fixed income activities and leading financial services businesses. She was EMEA head of market specialists at Bloomberg and has also worked at Credit Agricole and Natixis in various roles, including in CLO structuring and secondary loan trading.