Contents

Structured Finance

Status quo or status go?

Law firm designation practices questioned

Dissatisfaction is growing among private credit funds and direct lenders regarding the common practise of law firm designation, whereby sponsor counsel can choose which counsel advises the lenders. The concern is that such a scenario could force them into less favourable positions in negotiations over securitisation transactions.

“The problem really is as simple as the private equity funds and the hedge funds having too much power at the moment. They are virtually able to call the shots in terms of how their debt is documented and by who – and all they want is for their transactions to close quickly and smoothly. In many instances, funds have become so dominant that they are able to tell their lenders which law firms they can use,” notes Conor Downey, partner at iLS London.

Although lender-side counsel is meant to act in the best interests of the lender, if the borrower directs which law firm the lender can hire, they could be incentivised to serve the borrower’s interests in order to secure future business with them. Downey adds: “To me, that is a clear conflict of interest for a law firm.”

Acting in the best interest of a client is written clearly into the Solicitor’s Code of Conduct. But in March 2020, the Solicitors Regulation Authority updated its advice - indicating that clients can give consent for no information barriers to be needed, on the basis that lawyers agree not to disclose material or confidential information regarding one client to another.

However, some question this change, as it appears on the surface to permit current practice – even if it is not explicit. Certainly, private credit funds are becoming more vocal about their dissatisfaction with current arrangements, as they believe they are getting increasingly less favourable terms on deals than they should be.

“Each deal chips away at any terms favourable to lenders, as deals often start at a point at which another deal has ‘cleared the market’ – and then looks to take a little more ground,” states Charlie Harvey, a partner-level headhunter for elite law firms in London and former magic circle finance lawyer.

Within the CLO sector, the issue of law firm designation is compounded by the domination of just a couple of firms in this practice area, after several large firms retreated from CLOs during the financial crisis – leaving only a few key participants when markets reopened with a great deal of power to dictate terms.

Several market participants suggest that what has triggered concerns over law firm designations more recently is the challenge of rising interest rates. “Many of these transactions were put together under the assumption that the then prevailing low interest rates would continue. So, the businesses financed in these transactions are now considering if they will actually have the cashflows to service interest rates that might increase to as much as 6% in a year or so,” Downey observes.

He adds: “So much debt has been put into these companies that it is starting to be debatable whether they will be viable or not.”

Conflict could arise in the rising interest rate environment in cases where a borrower gets into difficulty, as the law firms appointed by the sponsor to work for the lenders could be tempted to advise against enforcement for the benefit of the private equity fund, even if that is the best option for the lenders. “So, I think firms are going to have to take conflicts of interest far more seriously and take a much broader approach to relationships, rather than looking at conflicts on a transaction-by-transaction basis, as many firms have previously done. That might mean that firms will have to choose which side of the table they want to be on and stay on that side – I see no other way out of it,” explains Downey.

He continues: “Many people I speak to in the market are adamant that they need to have their own properly renumerated lawyers on their deals, which I think private equity houses do already get.”

A proposed resolution to ethical issues associated with powerful borrowers designating lenders’ counsel would be bifurcating law firms into those counsel that only act for lenders and those that only act for sponsors. However, one source suggests that if each lender had its own counsel, deals would take longer to execute, the efficiency of transactions would decrease – with multiple different lawyers feeding changes into documents - and costs would increase as each lender counsel would need to be paid.

“A few big transactions would have to blow up before we see any changes made, because current arrangements haven’t yet caused any harm,” concludes one partner at a major lender-side law firm. “There are transactions out there – lots of them. And sooner or later highly indebted airport operators in the UK, pub companies and other businesses are going to blow up – especially in the current environment.”

Claudia Lewis

Structured Finance

SCI Start the Week - 6 February

A review of SCI's latest content

Last week's news and analysis

Book building
Obra Capital answers SCI's questions

CRT expansion continues
BBVA taps private market again

Default boost
Corporate defaults rise in 2022

Expanding east
Raiffeisen grows CEE foothold

Growing pains?
Blockchain, digitisation addressing securitisation inefficiencies

Mind the gap
Euro CRE refinancing risk gauged

The affordability conundrum
Impact of alternative credit scores explored

Time to shine
Multi-sector structured credit 'top performer'

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

SCI ESG Securitisation Awards 2023
The submissions period has opened for the 2023 SCI ESG Securitisation Awards, covering the European cash securitisation market over the 12 months to 31 December 2022. Nominations for the awards should be received by 15 February and winners will be announced at the London SCI ESG Securitisation Seminar on 25 April. For further information about the SCI ESG Securitisation Awards, click here: https://www.structuredcreditinvestor.com/SCI_Awards-ESG.asp.

Podcast
In the latest episode of the ‘SCI In Conversation’ podcast, we chat to Reed Smith partner Iain Balkwill about prospects for a CRE CLO market in Europe. To access the podcast, search for ‘SCI In Conversation’ wherever you usually get your podcasts or click here.

SCI Markets
SCI Markets provides deal-focused information on the global CLO and European/UK ABS/MBS primary and secondary markets. It offers intra-day updates and searchable deal databases alongside CLO 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
Digitisation and securitisation - February 2023
Blockchain and digitisation are increasingly being incorporated into the securitisation process. This Premium Content article explores the benefits and challenges that these new technologies represent.

Alternative credit scores - January 2023
The GSEs are under considerable political pressure to extend credit to the underserved. But what does this mean for CRT investors, issuers and rating agencies? This Premium Content article investigates.

CEE CRT activity - January 2023
Polish SRT issuance boosted synthetic securitisation volumes last year. This Premium Content article assesses the prospects for increased activity across the CEE region.

Upcoming SCI events
SCI's 7th Annual Risk Transfer & Synthetics Seminar
9 February 2023, New York

SCI’s 2nd Annual ESG Securitisation Seminar
25 April 2023, London

SCI’s Transport ABS Seminar
May 2023, New York

SCI's 9th Annual Capital Relief Trades Seminar
19 October 2023, London

Structured Finance

QT underway

'Slight' tightening forecast for ECB-eligible ABS

Rabobank credit strategists predict a drop of 45.8% in ECB reinvestments across all APP sub-programmes between March and June, equating to a potentially sizeable €1.5bn in redemptions not being reinvested, as the central bank embarks on its quantitative tightening programme. This figure is expected to rise to 80.7% in the second half of this year, given seasonality of redemptions and an assumed increase in QT to €20bn a month.

QT marks the first real reduction in ECB support for the European ABS market. The impact of the central bank’s withdrawal on ABS spreads depends on how much will still need to be reinvested and what kind of primary presence is required to do that, the Rabobank strategists suggest.

For the ABSPP, estimated partial reinvestments are around €440m a month in March through June. From July onwards, the remaining estimated reinvestments are only around €120m.

However, the ECB has already failed to keep the size of the ABSPP steady. For example, during July 2022 to end-January 2023, holdings dropped by €3.6bn.

“We believe this has been mainly driven by limited eligible primary market supply. In our opinion, there’s a good chance relying solely on secondary markets may be challenging for the remaining reinvestments, making a more gradual approach to reducing primary participation likely in our view. Hence, for ABS issuers wanting to take advantage of the ECB bid, the window of opportunity is in our view limited,” the strategists note.

They believe the impact on spreads will be closely linked to the ECB’s primary market participation. Hence, as QT gets underway, spreads are likely to mostly reprice through the primary rather than secondary market.

“ABS issuers may be in for a rude awakening though, as the ECB’s primary order size was reportedly still a maximum of 40% last year and so the worst case of going straight to 0% would mark a very abrupt change in market support. But even a gradual reduction in primary order sizes of, let’s say, 10% a month, would already be impactful in its own right. Overall, as the ABS investor base is smaller and more fragmented than for covered bonds, a large buyer like the ECB stepping back will definitely not go unnoticed,” the strategists observe.

They suggest that the central bank’s withdrawal may result in slight tightening for ECB-eligible paper. For non-ECB eligible paper, they foresee moderate spread tightening on average.

Claudia Lewis

Capital Relief Trades

Hedging alternatives eyed

JPM said to be exploring alternative risk transfer structures

JP Morgan is believed to be exploring alternative risk transfer structures given the persisting uncertainty in the US around the regulatory treatment of synthetic securitisations. However, market sources believe that the impasse is expected to be resolved this year amid the incorporation of Basel IV into the US regulatory framework.

According to sources, the US lender is exploring CDS and SPV structures as alternative wrappers to the CLN format as well as old school cash structures such as the one that was executed by Customers bank last year (SCI 12 October 2022).

US regulators raised issues with the direct CLN structure in 2022 (SCI 19 August 2022), but the same sources qualify without detail that the discussions are technical in nature and can be resolved through simple contractual changes.

The regulatory impasse has dramatically reduced US issuance. Indeed, according to SCI data, the US CRT market grew from US$128.96m in 2019 to US$2bn in 2021 in total tranche notional terms. However, last year that figure was more than halved (US$705m).

The US regional banks such as Western Alliance, PacWest and Customers bank breathed some life into the market last year, given the more fragmented regulatory architecture in the United States (see SCI’s capital relief trades database).

The resolution of the regulatory challenges is particularly salient due to all the capital management challenges that US banks began encountering last year.

Share buybacks for instance had to be suspended in some cases to meet higher bank capital requirements, amid what a Seer Capital report called a “double whammy” of higher RWAs and a higher required capital ratio due to adjustments in capital regulation.

The challenge here is twofold according to the Seer Capital report. First, RWAs ascribed to derivative counterparty exposures increased significantly at the beginning of 2022 based on the required adoption of the Standardized Approach for Counterparty Credit Risk (“SA-CCR”).

US banks are subject to the Collins Amendment to the Dodd Frank Act, requiring them to calculate RWAs based on the higher of the standardized approach and the IRB approach. The adoption of the SA-CCR boosts standardized RWAs versus IRB RWAs.

Second, minimum CET1 ratios set by the Federal Reserve Board include a base requirement plus bank specific buffers determined based on criteria including size and performance in stress tests. Hence, stress capital buffers (“SCB”) for US banks can be adjusted depending on their performance in these tests.

Consequently, the capital regime renders risk transfer technology and especially programmatic issuance an essential tool in managing higher and more volatile capital requirements.

Stelios Papadopoulos

Capital Relief Trades

Risk transfer round up-8 February

CRT sector developments and deal news

Bank of Montreal has called a synthetic securitisation called Manitoulin Muskoka series 2018-1. The transaction was executed in 2018 and references US and Canadian leveraged and corporate loans (see SCI’s capital relief trades database).

The last Muskoka trade was finalized in October last year and was backed by senior secured and senior unsecured corporate loans.  

Stelios Papadopoulos

Capital Relief Trades

Risk transfer line-up finalised

Focus on future of North American CRT

SCI’s 7th Annual Risk Transfer & Synthetics Seminar is taking place in-person on 9 February at the offices of exclusive host Clifford Chance in New York. The event is chaired by Mayer Brown partner and structured finance practice co-head Julie Gillespie, and features a keynote address by Standard Chartered global G10 FX research and North America macro strategy head Steve Englander.

The seminar begins with a market overview panel, focusing on the key takeaways from the last year for the North American capital relief trade sector. A panel on mortgage risk transfer follows, which will debate whether 2022 was the year the reinsurance market came of age.

Panellists will then discuss whether overzealous regulators are killing the US CRT market in the regulatory landscape panel. A panel on issuer and investor perspectives follows, with a panel discussing the year ahead rounding proceedings off. The seminar ends with a cocktail reception.

SCI’s 7th Annual Risk Transfer & Synthetics Seminar is sponsored by Allen & Overy, Arch MI, ArrowMark Partners, Cadwalader, Credit Benchmark, Guy Carpenter, Linklaters and Mayer Brown. Panelists also include representatives from Barclays, BofA Securities, Chorus Capital, Christofferson Robb & Company, D.E. Shaw, Deutsche Bank, Eagle Point Credit Management, FHFA, IACPM, International Finance Corporation, JPMorgan, Mark Fontanilla & Co, PIMCO, Piper Sandler and Seer Capital.

For more information on the event or to register, click here.

Capital Relief Trades

Canadian wave begins

TD unlocks Canadian CRT market

Toronto Dominion is expected to close a synthetic securitisation of corporate loans this month, becoming the first Canadian bank after Bank of Montreal to execute a synthetic securitisation. The lender is riding a wave of Canadian CRT issuance as Canada frontloads the Basel output floor this year (SCI 22 November 2022).

According to market sources, the Toronto Dominion transaction is a capital relief trade backed by corporate loans, but a portion of the disclosed portfolio features leveraged loans. The deal is expected to close this month.

Meanwhile, CIBC is also said to be readying a synthetic ABS deal. However, unlike the Toronto Dominion trade, the portfolio in this case is a blind pool and consists of predominantly commodity focussed investment grade corporate loans. IPTs for the CIBC CRT are believed to be in the lower double digits. Nevertheless, sources qualify that both deals have effectively the same granularity of around 200-250 borrowers.

Further issuance is expected from Royal Bank of Canada which is working on two capital relief trades. The first one is backed by leveraged loans while the second one references corporate exposures.

The rise in issuance in the Canadian market marks a significant break with the past given that the only active originator until now has been Bank of Montreal. The bank itself has experienced a record year for its own risk transfer issuance with a total of ten synthetic securitisations last year (SCI 5 December 2022). Issuance was driven by BMOs acquisition of Bank of the West.

The pickup in the Canadian market is perhaps not surprising given that the Canadian supervisor, the office of the superintendent of financial institutions (OFSI), stipulated in an official letter that was published on January 31, 2022, that the Basel output floor would have to be effectively frontloaded this year.

According to the letter, the implementation of the 72.5% Basel output floor will be phased in over three years beginning in fiscal 2Q23. The regulatory changes further included the introduction of new deductions from CET1 capital for certain exposures formerly subject to a 1250% risk weight.

Stelios Papadopoulos

CMBS

Extension risk eyed

Brookfield control would be 'positive' for ELoC 39

High extension risk but low default risk is forecast for German multifamily CMBS Haus (European Loan Conduit No. 39). In its latest European Securitisation Weekly publication, BofA Global Research suggests that the transaction is behind its business plan and reliant on equity top-ups from the sponsors.

“The assets and the loan have not deteriorated, in our view, but the anticipated upside from modernisation capex has not materialised yet,” BofA Global Research analysts note.

Haus, which priced in August 2021 (see SCI’s Euro ABS/MBS Deal Tracker) and is sponsored by a Brookfield (90%) and Capiterra Holding (10%) joint venture, is backed by a single loan secured primarily on 6,284 residential units located in the state of North-Rhine Westphalia in Germany. The portfolio is 96% residential by rental income, 1% commercial and 2% parking.

The loan is currently in cash trap, due to a breach of the 8% debt yield trigger since April 2022. The current debt yield is 4.2%, which is up from 4% in 2021. 

The portfolio had historically suffered from underinvestment and the business plan envisages modernising vacant units to improve the portfolio's occupancy and rental profile. The business plan budgeted €70m of capex over a five-year period, with 2,250 units – equating to 75% refurbishment coverage - identified for refurbishment within the first two years.

However, refurbishment of only 233 residential units is believed to have been completed to date, plus an additional 882 units that are identified as having been completed but not initially identified for refurbishment. As a result, the vacancy rate is practically unchanged at 41% and contracted rent is €19.4m, up by just 4% from 2021.

That the anticipated rental growth has not materialised has increased the deal's reliance on the funds allocated to the rent guarantee account, which the seller initially seeded with €23.3m. Within five periods, the rent guarantee was depleted and needed to be topped up with an additional €7.1m, according to BofA Global Research.

Brookfield is understood to be discussing with its JV partner restructuring the joint venture arrangements, to remove it from the equity structure, thereby taking full control and expediting the business plan. The BofA analysts indicate that the move is “a positive sign for the future performance of the portfolio”.

In terms of debt service, the loan margin is scheduled to increase to 3.25% from 2026 and new hedging would need to be purchased, which is likely to be more expensive than the current interest rate cap. BofA Global Research estimates that interest on the loan could exceed €4m per quarter, which could pressurise the sponsor to accelerate modernisation works to increase the rental income.

The Haus portfolio was last valued in October 2022, at €423.7m (see SCI’s ABS Markets Daily - 27 January). Multifamily yields have increased by about 10bp since then, which has likely reduced the valuation by a further 4% to around €415m today.

“Looking ahead, we suggest stressing the yield by an additional 75bp to reflect the rates outlook. We assume 3% rental growth to reflect the positive inflation environment and restricted supply in the sector. The combined effect is a 14% reduction in the property valuation from the current valuation,” the BofA analysts estimate.

The LTV could reach 87% as a result. Given that the loan is not subject to financial covenants and the debt yield and coverage ratios are supported by a relatively stable rental income, the stress from higher rates affects LTV more than debt service, the BofA analysts suggest.

As such, the impact could be limited to ratings downgrades in the near term, but refinancing prospects could be affected in the longer term. The analysts anticipate that the deal could extend beyond 2026, until enough modernisation works are completed that the portfolio metrics improve sufficiently to allow the debt to be refinanced.

From January 2027, six months after the expected maturity date, the servicer also has the ability to sell the loan, providing the price does not incur any losses.

Corinne Smith

Structured Finance

Alternatives combination agreed

Sector developments and company hires

Alternatives combination agreed
FS Investments and Portfolio Advisors have entered into a definitive agreement to combine their firms. The move is set to see a joint growth in excess of their combined US$73bn in assets under management and a significant expansion to their resources - including a permanent capital base and a new distribution platform. As a combined company, the two firms hope to meet the rising investor demand for alternatives by offering a broad suite of alternative investment solutions, including structured credit, for both institutional and individual investors. The transaction is due to close in 1H23 and will preserve Portfolio Advisors’ autonomy and its teams across the globe.

In other news…

Clinton Group CDOs transferred
Dock Street Capital Management has been appointed successor collateral manager for the Bleecker Structured Asset Funding and Varick Structured Asset Fund ABS CDOs. The transactions were previously managed by Clinton Group. Moody’s has confirmed that the move will not affect the ratings of any notes issued by the deals.

EMEA
Sculptor Capital Management has promoted its head of European CLOs, Adeel Shafiqullah, to executive md. Based in London, he was previously md at the firm, which he joined in 2015. Before that, Shafiqullah worked at PineBridge Investments, Credit Suisse and Chanin Capital Partners.

Structured Finance

Survey shows rise in ESG disclosure, investing activity

Sector developments and company hires

Survey shows rise in ESG disclosure, investing activity
ESG disclosure and investing activity within structured finance grew by 15% over the last two years, according to the SFA’s 2^nd Biennial ESG Market Sentiment Survey: Securitisation Issuer and Investor Perspective. The findings suggest that issuer disclosure is growing thoughtfully, with 40% of respondents reporting that they provide some ESG disclosure and another 40% seriously considering it. From an investor perspective, disclosure of collateral-level information is a fundamental imperative.

ESG disclosure in the structured finance market has nevertheless begun to incorporate a broader range of asset classes, including RMBS, CMBS, auto, personal loans, data centre, PACE and railcar collateral.

The top ESG integration motivator for issuers continues to be ongoing demand from investors, according to the SFA survey. Meanwhile, ‘client demand’ and ‘alignment with firm values’ continue to be the top ESG motivators for investors, with ESG investment strategies correspondingly shifting to meet changes in underlying client demand.

For its 2022 survey, SFA polled 55 structured finance market participants on the use of ESG disclosure metrics in investor reporting, due diligence and client investment alternatives. Respondents represented a diverse range of participant types and market sectors.

In other news…

EMEA
Scope has promoted Florent Albert to senior director and head of the structured finance commercial real estate team. Based in Berlin, he was previously director for structured finance at the rating agency, which he joined in October 2017. Before that, Albert worked at Barclays and BGL BNP Paribas.

Five sponsors prep FIVE CMBS
The first US conduit CMBS 2.0 transaction to be collateralised solely by loans with five-year terms has hit the market. Dubbed FIVE 2023-V1, the US$765.5m deal also counts five sponsors – Bank of Montreal, Barclays Capital Real Estate, Citi Real Estate Funding, German American Capital Corporation and Goldman Sachs Mortgage Company.

The transaction is backed by 26 loans secured by 43 properties located throughout 18 MSAs, of which the three largest are New York (accounting for 15.1%), Los Angeles (13.5%) and Long Island (9.8%), according to KBRA. The pool has exposure to all major property types, with five types representing more than 10% of the pool balance: office (29.1%), retail (26.5%), industrial (14.1%), multifamily (12.5%) and mixed-use (11.3%). The five largest loans - which include Brandywine Strategic Office Portfolio (9.8%), 3PL Distribution Center (8.7%), Sentinel Square II (8.4%) and Blue Oaks Town Center (7.4%) - represent 44.1% of the initial pool balance, while the top 10 loans represent 68.9%.

North America
Jim Stehli has joined Polen Capital as co-lead of its CLO platform, based in Boca Raton. Stehli was previously md, head of US CLO and securitised products trading at Mizuho in New York, which he joined in April 2014. Prior to that, he worked at CRT Capital Group, UBS, PaineWebber, Kidder Peabody and JPMorgan.

Structured Finance

Green auto ABS debuts

Sector developments and company hires

Green auto ABS debuts
Toyota Financial Services Italy is in the market with Koromo Italy, an Italian STS auto ABS backed by a €412.4m portfolio fully comprising new hybrid, plug-in and electric vehicles (SCI ABS Markets Deal Alert - 7 February). The pool consists of 22,344 auto finance contracts extended to 22,298 borrowers, with a weighted average seasoning of 18.76 months. On average, the balloon instalment portion accounts for 50.5% of the purchase price and 70.45% of the total current outstanding balance of the total pool.

In general, AFV have a higher likelihood of technological obsolescence and their recovery values are more sensitive to shifts in technological advance and consumer demand. However, Moody’s notes that HEVs are no longer first-generation models and a meaningful secondary market already exists, thereby limiting the uncertainty on their future market prices. Further, the issuer has no recourse to the vehicles, meaning that any volatility in future market prices will be less relevant for expected recovery rates.   

In other news…

CLO interval fund prepped
Flat Rock is set to launch a CLO-backed interval fund, the Flat Rock Enhanced Income Fund. Marking Flat Rock’s third interval fund, it will focus on investing in CLO double-B notes as a means to offer investors more diverse exposure to senior secured loans. As well as meeting the firm’s mission of investing in niche asset classes to generate more innovative risk-adjust returns, the fund strives to provide a solid buffer against losses, with double-B rated CLO tranches having shown average annual defaults of just 32bp since 1994.

EMEA
Hilltop Credit Partners has appointed new a new cio as it seeks to support the growth of its loan book across the UK and its expansion into the European market. As cio, Claudiu Gheorghita will lead the expansion of Hilltop’s business across Europe, utilising his experience to address the emergent and rising need for flexible capital in the current volatile financial environment to stabilise old or establish new developments. Gheorghita joins Hilltop from Nomura, where he led its real estate and securitised products division, and brings more than a decade of experience in real estate principal finance across all asset classes in major European markets.

North America
Credit Suisse has promoted senior CLO structurer, Francis Teo, to head of its US CLO structuring team. Teo’s promotion comes just under two years after joining the firm in New York to support its CLO and CBO originations and structuring team. Prior to this, he worked as a credit ratings analyst for Moody’s, covering CMBS/CRE CLOs and CLO/CBOs.

Structured Finance

SPG spin-out rebranded as ATLAS

Sector developments and company hires

SPG spin-out rebranded as ATLAS
Apollo and Credit Suisse have completed a substantial first close of their previously announced transaction, under which affiliates of the former purchased a significant portion of the latter’s securitised products group (SCI 28 October 2022). A majority of the assets and professionals associated with the transaction are now part of or managed by the rebranded ATLAS SP Partners, a new standalone credit firm focused on asset-backed financing and capital markets solutions.

ATLAS SP Partners is a high-growth franchise helping specialty finance companies, financial sponsors, corporates, REITs and a variety of other clients access structured financing and portfolio solutions. The company is led by ceo Jay Kim, previously md and head of securitised products at Credit Suisse, and includes a team of more than 200 professionals.

Apollo, through its affiliates, is the majority shareholder of ATLAS SP Partners and serves as a long-term capital partner to the company, alongside additional third-party capital partners. Forming a diverse and robust capital base is designed to enable ATLAS SP Partners to offer clients an enhanced suite of products and capabilities.

The company serves clients throughout the growth lifecycle from early stage to mature public companies, providing asset-backed warehouse financing, forward flow and asset purchases, and capital markets and distribution services. Its expertise spans a wide range of asset classes within residential and commercial real estate, and corporate and consumer debt.

ATLAS SP Partners primarily originates high-quality, investment-grade assets that are attractive to a broad range of investors and align with the balance sheet needs of Athene (SCI 9 March 2021) and other retirement services companies, which are estimated to hold approximately 95% of their assets in high grade credit instruments.

Certain additional assets and international employees are expected to transition from Credit Suisse to the new company throughout 1H23.

In other news…

EMEA
Pemberton has appointed Pavol Popp as a portfolio manager for its NAV financing strategy. Popp will work with the newly established NAV team to develop its ability to service the needs of the market, as it works to provide flexible capital solutions for Pemberton’s management companies. He joins Pemberton from JPMorgan, where he served in multiple leadership roles, including global co-head of financing solutions and head of EMEA structuring.

LDI proxy contest quashed
Anthony Hsieh has stepped down as executive chairman of loanDepot (LDI), pursuant to a mutual agreement unanimously approved by the firm's board. This action was in light of Hsieh's decision to run a proxy contest against LDI through his nomination of a director candidate outside of the governance process overseen by the board's nominating and corporate governance committee. He will continue to serve as chairman of the board, however.

Hsieh has submitted his nomination of a director candidate, Steven Ozonian. At Hsieh's request, the board's nominating and corporate governance committee has interviewed Ozonian as part of its ongoing process for evaluating potential nominees for election at the firm's 2023 annual meeting. Prior to the completion of the evaluation process, Hsieh informed the board of his intention to use his voting power to replace sitting independent director Pamela Hughes Patenaude with Ozonian.

Patenaude, who has served as a director since 2021, is a real estate and housing policy expert with a four-decade record of success as an executive in government, the non-profit sector and private industry. She is a principal at Granite Housing Strategies and previously served as Deputy Secretary of the US Department of Housing and Urban Development (HUD) and before that as director of housing policy for the Bipartisan Policy Center.

North America
TMI is expanding its capital markets services business with the hire of new md, Jason Bross. Bringing more than 25 years of capital markets, alternative finance and asset management experience to the firm, Bross will cover business development and relationship management within the capital markets sector in his new role. TMI aims to leverage Bross’ experience in providing finance solutions to build out its loan agency and capital management services as it strives towards expanding back-up servicing. Bross joins the firm from Lattitude20 Capital Partners, where he was the co-founder and cio.

Structured Finance

MK&C acquisition prompts CS carveout

Sector developments and company hires

MK&C acquisition prompts CS carveout
Credit Suisse has progressed the carveout of CS First Boston as a distinct capital markets and advisory-led business (SCI 28 October 2022) through the acquisition of The Klein Group (MK&C), for a purchase price of US$175m. The seller will receive equity in CS First Boston in the form of a convertible note, while Michael Klein has been appointed ceo of banking and ceo of the Americas, as well as designated ceo of CS First Boston. He will join the executive board and report directly to group ceo Ulrich Körner.

MK&C is an international investment banking boutique and registered broker-dealer, with deep and long-standing client relationships around the globe. MK&C, which is based in New York and employs approximately 40 professionals, has advised on transactions worth over US$1.5trn since its formation in 2010. The MK&C team will integrate with, and is expected to enhance, the management and advisory capabilities of CS First Boston.

Klein has over 35 years of investment banking and strategic advisory experience. In October 2022, he stepped down from the Credit Suisse board, which he joined in 2018. He was previously ceo of Citi’s institutional businesses, responsible for the bank’s corporate, institutional and government businesses.

Klein’s appointment to the Credit Suisse board and the bank’s acquisition of MK&C are subject to regulatory approvals, with the transaction expected to close in 1H23. Credit Suisse retains control over the ultimate scope and structure of CS First Boston, including options to attract third-party capital in the future.

In other news…

EMEA
Alantra has bolstered its coverage of the FIG sector with the appointment of Pedro Urresti as an md based in Madrid. Urresti brings over 30 years of investment banking experience in advising European banks, insurance companies, asset managers and public sector institutions. He joins Alantra from HSBC, where he was co-head of the European FIG business. Prior to that, he worked at BBVA and JPMorgan.