Contents

ABS

Cloudy skies for aircraft ABS

Despite a deal in December, aircraft ABS has problems to solve

Investment bankers are keen for the aircraft ABS market to take to the skies, but it remains grounded due to inherent structural defects, say sources.

“Bankers are pushing very hard to have the capital markets open again but in my opinion it will take some time before this happens. I don’t know when this will be,” says Ali Ben Lmadani, founder and ceo of ABL Aviation.

Ben Lmadani’s firm had hoped to bring its inaugural ABS deal in Q4 of last year but was forced to postpone due to fundamental market illiquidity. There is no telling when it will now be able to bring this deal to market.

The war in the Ukraine has exposed fault lines in the market regarding the adequacy of insurance provisions, but the problems are more deep-seated than that.

Many existing ABS deals collateralized older aircraft which were improperly valued, and this has spooked investors.

“Lot of ABS deals were using mid-life and end-of-life aircraft. You needed to have an adjustment based on valuation and that has become an issue,” says Ben Lmadani.

There are two ways in which the market needs to move forward from the current impasse and into a more healthy phase. Firstly, suggests Ben Lmadani, asset managers need to an economic interest in the performance of the deal and thus be motivated to ensure valuations are properly conservative.

“The asset managers need to have skin in the game,” he says.

Asset managers will have an economic stake in the transaction if they were the sponsors and sellers of the aircraft in the first place. But this must be balanced with their ability to achieve true sale treatment. Too much skin in the game, and accountants are likely to say that the transaction is not a true sale, meaning the assets will remain on their books and ballooning balance sheets.

Investors also need to do their homework better, so they have a clearer idea of the value of the assets being securitized, add market experts.

But there is no immediate sign that either of these objectives will be attained. SCI addressed these themes in June of last year but the market is no nearer a solution.

There has been one deal priced since mid-2022, which was a December $304m securitization backed by a pool of 15 Airbus and Boeing narrow body aircraft, leased to ten different airlines across nine countries. The trade, designated MAST 2022-1, was the inaugural aircraft securitization for the borrower.

MAST 2022-1 was the first aircraft securitization issued since June 2022 and was structured with a senior A- rated tranche of investment grade debt. Only the A notes ended up with investors, add sources, so the deal is something of an outlier.

The average age and lease term of the aircraft were 6.0 years (for Airbus) and 6.4 years (for Boeing) and were leased to ten different airlines across nine countries.

Simon Boughey

Structured Finance

SCI Start the Week - 13 February

Last week's news and analysis

Canadian wave begins
TD unlocks Canadian CRT market
Extension risk eyed
Brookfield control would be 'positive' for ELoC 39
Going green?
ESG priorities shifting to meet macroeconomic pressures
Hedging alternatives eyed
JPM said to be exploring alternative risk transfer structures
QT underway
'Slight' tightening forecast for ECB-eligible ABS
Risk transfer line-up finalised
Focus on future of North American CRT
Status quo or status go?
Law firm designation practices questioned

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

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 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

Backing blockchain

Credit risk considered as DeFi eyed to fund real world assets

Further efforts are underway to demystify the credit risk associated with DeFi securitisations as interest in its capability to finance real world assets (RWAs) grows (SCI 2 February). A new S&P report analysing the key credit and legal risk considerations associated with such transactions marks a further step by the rating agency to better understand the digital space, following its appointment of Chuck Mounts as head of DeFi last year.

“Over the last few years, DeFi has really been focused on developing financing tools within the crypto ecosystem, enabling solutions to lend crypto assets, to borrow against crypto collateral, and to trade crypto assets,” explains Andrew O’Neill, senior director in rating methodologies at S&P.

The rating agency anticipates that the financing of RWAs through DeFi could be supported by the issuance of blockchain-based securitisations, as a move away from the initial use of DeFi to streamline transaction processes disconnected from the real economy. “This is a use case that lends itself quite well to having certain transaction features automated and, in some cases, available publicly,” explains O’Neill. “This is a fairly recent idea, and while we’ve not assigned ratings to anything like this, we wanted to explore the key risks that we could see emerging here out of this concept.”

Indeed, a number of fundamental risks would need to be addressed in order to develop a solution robust enough to attract meaningful institutional investor interest. O’Neill explains: “With real world assets, we are ultimately talking about the same traditional asset types we see in usual securitisations – so the analysis of the underlying credit risk of the underlying assets is not likely to be any different than when applying existing methodologies.”

Conceptually, the use of DeFi securitisation protocols in financing RWAs is structurally aligned with that of traditional securitisations, meaning the underlying assets and core credit risks would remain relevant. Traditional securitisation features could mitigate some of the specific risks brought up in DeFi lending protocols, as existing practices relating to the flow of funds and priority of payments could benefit likely liquidity risk, reductions in available coverage for credit risk and the risk of some investors wanting to withdraw sooner than others.

Although the underlying credit risks would remain similar to traditional transactions, they could throw up additional considerations in respect to new originations or originators. “There will be some legal aspects to consider that are quite novel in relation to what the investors are actually holding – so, are they holding tokens or do they have traditional bonds, as well as tokens? And what would tokens represent in terms of ownership claims or security claims on the issuer? And would these have any tax implications?” asks O’Neill.

He adds: “While traditional securitisations have had pretty clear answers for similar questions for some time now, because we are asking these questions in a slightly different context, some of that will be quite new.”

As the future or impact of any potential regulatory interventions in this space remains uncertain, S&P acknowledges that such uncertainty would also need to be included in evaluating the creditworthiness of tranche-tokens.

DeFi features in a transaction also throw up concerns and considerations relating to data and smart contract vulnerability to cyber risk and data manipulation. Additionally, the volatility risk of using stablecoin for payment in transactions is considerable, with S&P highlighting the potential impact of exchange rate fluctuations or the chosen stablecoin deviating from its peg or being no longer available.

Nevertheless, the use of on-chain capital can not only offer greater transparency on asset pools and improve data sharing in both size and speed, but also it does not exclude investors with on-chain assets – opening up the securitisation market to new investors with new capital to deploy in DeFi securitisations. Other benefits include reducing costs and speeding up almost all parts of the process, including payment settlements for investors as disintermediation is facilitated through on-chain payments. Lesser known benefits include reducing counterparty risk and operational dependency relative to that of traditional securitisations.

“It is quite interesting from our perspective to analyse the risk perspectives of the potential applications and ideas emerging out of DeFi products,” O’Neill concludes. “There are certainly two sides to this interest – you have the more traditional financial community that perhaps don’t understand all the technological aspects and, on the other, you have people coming from a technology background who don’t understand the more traditional fundamental credit risks.”

Claudia Lewis

Capital Relief Trades

Shifting gear

Barclays discontinues SPV structures

Barclays has discontinued SPV structures for its Colonnade programme and replaced them with an alternative collateralized CLN format, as the bank’s 2022 CRT issuance remains broadly in line with its 2021 activity.  

According to Frank Benhamou, md, and head of Capital and Structured Finance Solutions at Barclays, ‘our Colonnade CRT programme is a consistent platform with a high level of standardisation both in terms of documentation, portfolio, and operations. Although we have primarily used CLN structures for a long time and this remains our preferred choice, we also used to have an SPV structure for investors unwilling to leave the cash proceeds with CRT issuers.’’

He continues: ‘’The SPV structure has now been discontinued and replaced by a more efficient collateralised CLN version that supplements our general uncollateralised CLN structures. We now have the option to have the cash deposited with Barclays and used to buy high quality collateral pledged for the benefit of investors.’’

Colonnade is a programmatic platform offering a high level of consistency across all transactions in terms of both documentation and portfolio construction. One of the key features of all deals is that they are bilateral, with the aim of building strong long-term relationships with investors.

The drivers of the programme include capital savings and the mitigation of IFRS 9 impairment volatility. The mitigation of IFRS 9 volatility works better for fully funded first loss tranches attaching at 0%, as opposed to mezzanine or unfunded tranches, given counterparty risk. Another driver is stress test mitigation, since banks can model losses, as well as factor in associated hedges.

The programme’s trades reference global corporate loans primarily in the US, UK and Europe while also including UK and US commercial real estate loans. Barclays incorporated CRE into the Colonnade programme for size and granularity purposes in 2021.

The bank managed to close US$1.4bn in total equity notional last year which is broadly in line with the US$1.6bn equity notional of the previous year. The 2021 tally rendered Barclays the most active CRT originator of that year (SCI 4 February 2022). The theme of last year was naturally inflation and the associated macroeconomic challenges. Concentrations in certain industries in this respect was a key consideration for certain investors.

Benhamou notes: ‘’due to the size of our programme, we generally start issuing early in the year rather than towards the end, which is more typical for a number of issuers, so we mostly avoided the general spread widening that occurred later in the year.’’

He concludes: ‘’We started witnessing some pricing changes around mid-2022 since CRTs are a private market driven by fundamental credit considerations rather than market value, so we observed a certain time lag versus other public asset classes. However, the price widening can be mitigated to some extent through appropriate portfolio construction.’’

Stelios Papadopoulos

Capital Relief Trades

Regulatory resentment

Delegates at SCI's New York seminar implore transparency

A near-unanimous call for greater clarity from US regulators was made by investors and practitioners at SCI’s annual risk transfer and synthetics seminar last week in New York.

Some delegates went further, with one noting that US regulators have been “much less constructive than the FHFA” to the CRT mechanism and pleading with them to “align with their European counterparts.”

The US bank CRT market is effectively on hold at the moment as regulators, beginning at some date in 2021, began to suspend regulatory relief to large institutions for capital relief trades, say sources. There is no knowing when, or if, this suspension will be lifted.

The whole process is shrouded in mystery, with another delegate at the summit saying it is remarkable that information about what regulators of the world’s largest financial market are thinking on any given subject is limited to what “someone overheard in an elevator in 1987.”

Regulatory stonewalling of the CRT mechanism comes at a time when the major US banks are facing increased pressure to ante up more and more capital. While the base CET requirement has not shifted from 4.5%, the G-SIB surcharges and stress test buffers have increased significantly lately.

So, for example, JP Morgan’s CET ratio will be 13% at the end of the year, compared to 11.2% at the end of 2021, while Bank of America’s CET ratio has increased from 9.5% to 10.9% in the same time period and Citigroup’s from 10.5% to 12%. These increases are solely due to augmented G-SIB surcharges and stress test buffers.

Not only have CET ratios been upsized sharply, major banks are now subject to higher RWAs than was the case several years ago due to the application of standardized treatment under the terms of the Collins Amendment. The gap between RWAs as calculated by IRBs and by the standardized version has grown increasingly wide.

Indeed, at the end of 2022, the differential in RWAs at the top four US banks was calculated by one delegate in his presentation in New York to be $294bn, giving rise to additional capital requirements of $38bn. The top four US banks by assets are JP Morgan. Bank of America, Citi and Wells Fargo.

Moreover, noted the delegate, standardized treatment is a blunt instrument in that it does not discriminate according to credit, only by asset class. So, for example, exposures to BBB+ counterparties and exposures to BB- counterparties are both assessed with a risk weighting of 100%, giving rise to identical capital requirement of 13%.

However, IRB models give a risk weighting of 114.2% to BB- exposures leading to capital required of 14.8% (more than under standardized treatment) while BBB+ exposures are afforded a risk weighting of 26.4% leading to capital required of 3.4% - a difference of minus 9.4%. These figures assume 8% capital and 5% buffers.

So, under the standardized version, lower risk credits require the same capital as higher risk credits, which does not incentivize banks to eschew high risk exposures in favour of lower risk.

Finally, the contrast to Europe is marked. Under Basel IV, to be phased in during the next five years, the RWA floor is 72.5% rather than 100% as under the standardized approach used in the US. A floor of 72.5% has been met with wide-eyed disapproval in Europe but its application results in a minimum capital requirement of 9.4% compared to 13% in the US.

Yet, noted a delegate, the US banking industry is much less concentrated than in Europe. The top five banks hold 50% of total banking assets, compared to 94% in Germany, 74% in Italy and 60% in Europe.

JP Morgan ceo Jamie Dimon has been a vocal critic of the US capital regime, and last week it was reported that the bank is rumoured to be looking at different risk transfer wrappers to the commonly used CLN structure in an effort to sidestep the regulatory red light.

Simon Boughey

Capital Relief Trades

Risk transfer round up-16 February

CRT sector developments and deal news

Caixabank is believed to be readying a synthetic securitisation of corporate loans with Societe Generale as the arranger. The bank’s last capital relief trade was finalized in July last year (see SCI’s capital relief trades database).

Stelios Papadopoulos

Capital Relief Trades

German SRT debuts

BNP Paribas launches new Autonoria SRT

BNP Paribas is marketing a full stack significant risk transfer trade from its Autonoria programme. The transaction is the first from the programme to reference German consumer loans. More saliently, it partially addresses limited excess spread levels via the replenishment criteria.   

Rated by DBRS Morningstar and Moody’s, the deal consists of classes A, B, C, D, E, F and G notes.

The six-month revolving pool comprises classic amortising loans (78.0 %) and balloon loans (22.0%). Most of the receivables represent used vehicles (85.4%). Lease contracts aren’t contained within the portfolio. Hence, the Issuer is not directly exposed to residual value risk. The portfolio is well seasoned at approximately 27 months and the amortization structure is pro-rata with triggers to sequential.   

Guglielmo Panizza vp at DBRS Morningstar notes: ‘’this is the first Autonoria transaction with exposure to auto loans granted to consumers in Germany, and here we notice a higher exposure to used car financing and recreational vehicles compared to the Spanish and French deals of the programme.’’

Alex Garrod, svp at DBRS Morningstar adds: ‘’The German subsidiary of BNP Paribas started a joint venture with Jaguar Land Rover. However, these loans were not eligible for the transaction. The exclusion maintained a lower that typical exposure to balloon loans and this is reflected in the length of the amortization profile’’.

Perhaps more saliently, as with other full stack deals, there’s limited availability of excess spread due to higher hedging costs following rising interest rates.

Nevertheless, BNP Paribas has found a simple way to augment excess spread levels without resorting to the use of an uncapped interest rate swap structure which is what other banks have utilized (SCI 25 November 2022). Limited availability of excess spread in full stack deals rendered synthetic securitisations a more attractive option last year (SCI 11 November 2022).

Garrod explains: ‘’The transaction structure aims to partially mitigate limited excess spread levels by incorporating a specific feature during the revolving period. One of the replenishment criteria aims to increase portfolio yield during the six-month revolving period by mandating that new receivables yield an interest rate higher than the portfolio’s weighted average at closing. However, it would take several years for full repricing to happen and there is only limited benefit to the trade.’’

Looking forward, Bilal Hussain, head of EMEA asset finance and securitisation syndicate concludes: ‘’It’s the debut trade from our German consumer finance subsidiary and witnessed a strong weekly roadshow. We are looking for execution next week.’’

Stelios Papadopoulos

CLOs

SCI In Conversation podcast: Jerry Ouderkirk, Pretium Partners

We discuss the hottest topics in securitisation today...

In this episode of the SCI In Conversation podcast, we chat to Pretium Partners senior md and structured credit head Jerry Ouderkirk about relative value opportunities in the CLO market. The interview was recorded in early January.

We also highlight three SCI Premium Content articles that were published in December. One is on the prospects for buy now, pay later (BNPL) securitisation; another is on the coming regulatory storm for the significant risk transfer market; and the other is on the use of back leverage in commercial real estate finance.

This podcast can be accessed here, as well as wherever you usually get your podcasts, including Apple Podcasts and Spotify (just search for ‘SCI In Conversation’).

CLOs

Highs, lows and CLOs

John Kim, Panagram ceo and portfolio manager of CLOZ, answers SCI's questions

Q: What can you tell us about the launch of Panagram’s new actively managed CLO ETF (CLOZ) (SCI 25 January)?
A: We’re very excited about our ETF (CLOZ) because it brings CLO opportunity to the retail market. Ultimately, we are trying to make it easy for retail investors to enjoy the benefits of CLOs that institutional investors have enjoyed for years.

Traditionally, CLOs have been difficult for retail investors to buy because they can’t access these investments directly and if you have a small amount of money, it’s hard to create diversified exposure. We think our ETF is unique because it gives people access to a part of the capital structure in CLOs that isn’t available in other CLO products right now. We believe individual investors will have the potential to achieve attractive risk-adjusted yields in CLOZ. 

The ETF concentrates on triple-B and double-B bonds; 80% of the investment mix will be CLOs rated triple-B and below. In our opinion, this will lead to enhanced risk yields for the underlying investors, especially as CLOs are arguably one of the most attractive risk-adjusted credit assets available to investors.

Q: How is this an effort to democratise CLO exposure?
A: Most CLOs can’t sell a bond or any part of the capital structure directly to an individual investor. The ETF attempts to solve the issue of needing access to the market and a substantial amount of capital to create the diversification, given the bond minimum on CLO bonds. CLOZ can bring diversified exposure with attractive yield to the individual investor, who can trade in one share of the ETF.

Q: What is the vision for Panagram’s business this year?
A: Panagram currently manages US$14.4bn in structured credit assets. Our vision is to continue to scale our expertise in the structured credit space with both institutional and retail investors.

For 2023, we anticipate launching several other funds. We recently filed a prospectus for a closed-end equity fund that will provide investors with diverse exposure to CLO equity.

In addition, we continue to partner with large institutional investors to provide customised access to structured credit in separately managed account format. 

Q: And how does Panagram mitigate the risk of the wider challenges looming over markets in 2023?
A: Inflation, rising rates, geopolitical pressures and recession are all concerning. With rates rising quickly in a short period of time, stress has been placed on some of the companies in our leveraged loan portfolio, as well as generally more stress within the corporate arena. However, we believe there are several attributes to note about CLO exposure that are positive mitigants to these kinds of situations.

First and most importantly, CLOs are primarily built on senior secured corporate loans. If you’re a lender in the capital structure of any company, we would consider it to be more preferable to be senior, first pay and secured by assets than it is to be in high yield bonds, the mezzanine loans or the second lien loans. While the debt service coverage ratios on senior loans have fallen due to the rise in rates, they haven’t yet fallen to a point where we think they are concerning.

It is for some of these reasons that the underlying asset class, senior secured loans, has performed well over the last 30 years. When you’re exposed to loans in a CLO format, you are taking advantage of the seniority and the security and then putting that into a structure that has a further capital cushion if you’re a debt investor. For newly created double-B CLO bonds, investors have approximately 10 points of capital beneath them when they start the deal; and given the structural protections of CLOs that deleverage deals automatically when you encounter a certain amount of portfolio losses.

As a result, there have been few losses at the double-B level. For CLOs rated by S&P, there have been zero defaults at the triple-B level since the GFC. So the structure has proven to work well, and we believe that will continue into the foreseeable future.

Q: How is CLO risk considered at Panagram?
A: Paramount to everything we do at Panagram is assessing risk and looking for ways to mitigate risks in downside scenarios. As it relates to CLOs, we are tracking bond fundamentals and technicals, but, in addition, we are monitoring the senior secured loan fundamentals and technicals.

One of the attractive aspects of the CLO market is the availability of data. We have the ability to track each CLO down to the individual loan level, how much we own, when the loan was purchased, sold, etc.

We are monitoring our loan exposure across multiple deals and with different CLO managers. Our CLO managers are our partners in assessing risk within the loan market.

We have the benefit from where we sit in the CLO ecosystem of having varied loan team perspectives. We value managers that are proactively optimising portfolios and actively trading portfolios to mitigate risk. 

We are currently finding value in triple-B and double-B rated CLOs. In terms of new issue equity, we think the arbitrage is quite challenged at the moment, given that loans have run up in price over the last month and the CLO stack has not tightened sufficiently to make the arbitrage attractive for new issue. However, that is changing rapidly as new issue deals are driving triple-A spreads down, and we think that will lead to more people wanting to securitise their warehouses.

Q: How do you differentiate yourself from your competitors?
A: Our team has expertise and scale in CLO investing. We trade up and down the entire CLO stack - from triple-A down to equity.

We see the market from the perspectives of the senior debt holders, mezzanine debt holders and equity – and that combined knowledge isn’t siloed, because we have one team doing the entire capital stack. So, our view of the market is the attribute that distinguishes us the most in terms of our investing.

When we invest in primary equity, we also tend to run the entire deal. We choose the manager, we do our own structuring and we try to create a deal that’s going to perform for the long term.

We are very selective about the managers we work with, as we work with only around 20 managers of the total 130 or so in the US. We spend a lot of time on manager diligence because these are long-term deals for us – we aren’t in it for short periods of time, so we want to make sure that when we commit capital, we are doing it with the right partners.

As it relates to our CLO ETF, some of our competitors have created CLO ETFs; however, our ETF emphasises investments in triple-B and double-B rated CLOs because we believe this is where the most attractive risk to yield can be found.

Q: With the ongoing evolution of the CLO market, what is your expectation for competition within the market this year?
A: There has been an increase in so-called tiering in the investment markets, as there is now a very clear distinction between managers considered to be tier one and those that are tier two or three. For investors, the amount of data that is available to us is vast, which wasn’t always the case in the market; in the last few years, the challenge has been to interpret the data properly, as there are a lot of metrics that go into these investment decisions.

New managers could be very challenged in this market, given the bifurcation in spreads between tier one and everyone else. When CLO managers perform well, they tend to attract more assets. Newer managers typically raise dedicated funds to launch their platforms before attracting third-party CLO equity investors like Panagram. This dynamic is a tailwind for the market, as it attracts new allocation to the CLO market, typically from new investors.  

Q: Within CLOs, whose burden do you believe dealing with ESG should be?
A: ESG is something that all market participants need to pay attention to, as capital flows can have a direct influence on ESG factors. However, private capital can only create change if it is directed in the right manner.

We follow a three-pronged approach at Panagram – the first being our attempt to influence underlying CLO managers away from certain loans in the markets that our employees identify as being problematic. There are certain ESG-related categories that we encourage our managers to eliminate their exposure to – especially when we are investing in CLO equity in a new issue deal, where we have greater ability to influence the thoughts of those managers.

Our second prong is corporate governance, where we emphasise gender and racial diversity in our hiring process and promote initiatives to train and retain employees of diverse backgrounds. Our third prong is our community engagement – where, for each fund we launch, we plan to donate a portion of the management fees to a local charity. For our CLOZ ETF, we have donated a portion of our fees to Mosholu Montefiore Community Center (MMCC), which provides educational resources and enrichment programmes for children, adults and the elderly in Manhattan and the Bronx.

Claudia Lewis

Structured Finance

Homogeneity RTS released for STS synthetics

Sector developments and company hires

Homogeneity RTS released for STS synthetics
The EBA has published its final draft regulatory technical standards (RTS) setting out the conditions for the assessment of the homogeneity of underlying exposures in STS on-balance sheet securitisation pools. At the same time, the authority has extended the existing work on the RTS on homogeneity for both ABCP and non-ABCP securitisations to ensure consistency for on-balance sheet securitisation to the overall STS framework.

These draft RTS amend the Delegated Commission Regulation (EU) 2019/1851 by extending the scope to on-balance sheet securitisations, considering the specificities of these securitisations. The existing provisions set out in the 2019 Commission Delegated Regulation are maintained, albeit with minor modifications to ensure consistency with the new mandate for on-balance sheet securitisations.

In particular, these RTS clarify that for on-balance sheet securitisations, homogeneous exposures need to be underwritten according to similar underwriting standards and serviced according to similar servicing procedures. In addition, they need to fall within the same asset category specified therein and be further assessed with reference to at least one of the homogeneity factors, such as type of obligor, ranking of security rights, jurisdiction or type of immovable property.

Finally, in order to ensure a continuation of existing securitisation transactions, transitional provisions have been introduced for securitisations that have been notified as STS and whose securities were issued before its application date. The aim is to ensure that existing transactions will continue to remain STS-compliant.

In other news…

EMEA
Groupe BPCE has joined the ranks of Scope Group's institutional shareholders. This latest investment follows the recent investment by AXA and reflects the growing relevance of the French market for Scope, with its Paris office – led by Marc Lefèvre – now the largest hub outside Germany. Indeed, French nationals hold some of the top positions at the rating agency, including chief analytical officer Guillaume Jolivet and supervisory board chair Inès de Dinechin.

Scope’s shareholders include several other European financial institutions - such as B&C Beteiligungsmanagement, Foyer, HDI/Talanx, Signal Iduna, SV SparkassenVersicherung and Swiss Mobiliar - as well as Germany’s largest foundation, RAG-Stiftung. The anchor shareholders of the Scope Group remain Florian Schoeller and Stefan Quandt.

Structured Finance

CLO portfolio management tie-up inked

Sector developments and company hires

CLO portfolio management tie-up inked
S&P has partnered with LevPro to offer enhanced transparency and efficiency for CLO credit portfolio management in the US and Canada. Under the agreement, S&P Global Market Intelligence will combine LevPro’s SaaS-based trade order management systems (OMSs) with existing WSO loan administration capabilities to support customers in the CLO market.

The LevPro platform provides an integrated front- to back-office CLO solution, which could have clients up and running in weeks instead of months typical for traditional OMSs. Key features of the CLO solution include: forward deal calendar with integrated data, trade order management and settlement, pipeline workflow and credit research, loan administration services, CLO compliance reporting, and portfolio dashboards and reporting.

Its technological architecture is also projected to reduce fees and shorten software release cycles for customers, as well as offer real-time access to data through integrated workflows and collaboration tools, as it strives to break away from end-of-day flush and fill systems.

In other news…

North America
Orix Corporation US has strengthened the distribution capabilities of its private markets business with two senior investor solutions hires. Damon Krytzer joins the firm’s asset management business as md and co-head of investor solutions, alongside existing co-head, Jordan Robinson.

Orix welcomes Krytzer to its Park City, Utah office to aid the development of its network of strategic investment partnerships and institutional investors across the middle-market private credit, real estate and private equity sectors. He joins the team from Probitas Partners, where he served as md and head of credit.

Additionally, David DeMilt will join as md of investor solutions to help boost the firm’s business development efforts and improve client and prospect engagement with the asset management platform. DeMilt will be based in the New York office and previously served as md for market and client relations at Oaktree Capital Management. He will report jointly to Krytzer and Robinson.

Structured Finance

Social housing RMBS debuts

Sector developments and company hires

Social housing RMBS debuts
Caisse des Dépôts et Consignations (CDC) has completed a rare securitisation collateralised by social housing loans originated by its savings fund division. Dubbed FCT FE Durable 2023, the €1bn transaction is backed a portfolio of 1,890 performing loans extended to 206 French social and affordable housing providers (SAHPs).

The largest, the top five and top 10 largest borrower groups account for 1.7%, 8.6% and 17% of the outstanding portfolio balance respectively, according to DBRS Morningstar. The initial portfolio exhibits a high geographic concentration in the French regions of Auvergne-Rhône-Alpes (accounting for 19.9% of the outstanding portfolio balance), Occitanie (9.7%) and Normandy (9.7%).

The portfolio benefits from guarantees extended by local authorities, covering 100% of the outstanding principal balance.

CDC acts as the servicer for the transaction and will remain the servicer until the liquidation of the issuer. Only CDC is authorised to originate, manage and collect regulated social housing loans in France.

The deal is static and the structure includes separate waterfalls for the payment of interest and principal on the notes, with the class A notes ranking in priority to the class B notes on both interest and principal payments.

In other news…

EMEA
Liberty Specialty Markets has promoted underwriter Tom Russell to lead underwriter – portfolio solutions, financial risk solutions, based in London. He joined the firm as senior underwriting assistant within the structured risk solutions team in November 2016 from Munich Re.

North America
Stifel Financial is expanding its agency MBS footprint with the launch of a new agency structured products group. The New York-based team will work to boost the firm’s fixed income origination products and services by purchasing and securitising Ginnie Mae project loans, as well as underwriting GSE and US small business administration loans.

The effort will be led by veteran securitisation professionals Karen Cady and Russell McKay as co-heads of the group, supported by respective group md and director, Kavitha Vignarajah and Serif Ustun. The team joins from Credit Suisse, where Cady served as director in the securitised products trading group and McKay worked as the head of agency CMBS trading and syndicate desk. Vignarajah was a member of the securitised product team, while Ustun was an analyst within the firm’s securitised products group.