News Analysis
Capital Relief Trades
Climate call
Calls for ESG synthetics framework grow
Capital relief trade investors and arrangers are beginning to cohere on the need for a framework for ESG synthetic securitisations given the lack of deal flow and adequate incentives.
PGGM published a proposal last month that outlined the key features of green securitisations which emphasized among other factors the need for high quality data.
Alien Pauw, senior investment manager at PGGM explains: ‘’the focus should be on the broader impact not just ESG. In this respect, banks should collect relevant data that helps assess the transition of their clients. So, the first step on the road to a sustainable securitisation framework should be the data.’’
The importance of data is reflected in PGGM’s position on use of proceeds (UOP) transactions but it’s not the only rationale. ‘’Use of proceeds doesn’t work for us since monitoring the redeployment of capital with the right data isn’t obvious. More importantly, green use of proceeds has no relation to the risk that we are assessing. In our view we cannot call a securitisation green when the securitised exposure is not green’’ says Pauw.
Similarly, Leanne Banfield states: ‘’The difficulty with use of proceeds synthetics is that the underlying portfolios could in theory be brown, which makes it difficult to comply with the ‘do no significant harm’ concept which underpins much of EU regulation. However, there’s an important question as to whether transactions could reflect the sustainability improvements of a brown firm.’’
Refinancing risk is another concern with UOP trades. Barend van Drooge, deputy head of credit and insurance linked investments comments: ‘’If you are investing in brown assets in a ‘green’ use of proceeds trade while the bank increasingly wishes to finance green, there’s an increased risk that the exposures in the securitised portfolio become stranded assets. Additionally, the bank has less incentive to help in a green transition which creates a misalignment and in that sense the investor takes the refinancing risk.’’
However, this is where disagreements on use of proceeds among investors begin to emerge. First, for some, high quality data is important but what is more crucial is the standardization and operationalization of data. Moreover, use of proceeds is a fruitful way to utilize synthetic technology given the restricted universe of ESG assets. Finally, data in UOP transactions isn’t an issue for several investors since they can plug into existing bank frameworks such as Santander’s sustainable finance classification system (SFCS) where every loan can be aligned with sustainability criteria.
PGGM also lays out quite strict portfolio criteria including sustainability linked loans which incentivize corporates to transition by agreeing on clear ESG targets as part of the loan contract. The latter seems to suggest that compliance with ESG targets will be prioritized over portfolio performance. This doesn’t mean that the two can’t go together but there’s no necessary connection between the two.
According to a Moody’s study for instance, green use-of-proceeds project finance bank loans experienced a lower default rate than non-green use-of-proceeds project loans, but the difference is likely due to ‘’subsample characteristics other than greenness, as the default rate on loans whose use-of-proceeds could not be determined was lower than that of green loans’’ says Moody’s. The ten-year cumulative default rate for green projects within the total infrastructure basket is 5.7% notes the study, lower than that of 8.5% for non-green projects, but higher than that of 2.9% for indeterminate use-of-proceeds projects. By comparison, corresponding default rates for Baa3-rated and Ba1-rated corporates are 5.4% and 10.4% respectively.
Portfolio performance ultimately determines CRT deal returns. Here investors note that returns for ESG CRTs can be lower, which renders the trades more costly.
According to one ESG CRT investor, ‘’deals tend to be more expensive from an investor perspective in the sense that the returns are lower since there’s an excess demand for this type of risk from ESG or impact funds. This applies particularly to UOP corporate deals. From our perspective, unless there’s a dedicated ESG fund it doesn’t make sense. In this sense, PGGM is right that you can’t have a dual objective. You can aim for a certain return while minimizing credit risk, but as soon as you add additional constraints, such as specific ESG targets, you necessarily reduce your universe of investment opportunities, and your returns therefore suffer.’’
The constraints of stringent ESG targets are reflected in the ultimate preference for Article eight relative to Article nine funds. Article eight funds are those that promote environmental and social characteristics while Article nine funds on the other hand are far stricter given their promotion of sustainable investment objectives. Under the EU’s Sustainable Finance Disclosure Regulation (SFDR), fund managers must comply with a mandatory disclosure regime that is split between Article six, eight or nine categories based on sustainability objectives.
According to Morningstar data, asset managers shifted some 40% of funds from Article nine to an Article eight categorisation in the final three months of 2022. Morningstar analysts noted that the shift was driven by ‘’regulatory developments and the stringent requirement of 100% sustainable investment stipulated for Article nine products.’’
Consequently, market participants have been raising questions about the nature of the incentive structure of a potential regulatory framework.
Robert Bradbury, head of structured credit execution and advisory at Alvarez and Marsal notes: ‘’if you look at green bonds, there’s a clear “push” from the market with plenty of asset managers who want to invest. From their perspective, green projects should have a better risk adjusted return than non-green projects.’’
He continues: ‘’This doesn’t necessarily mean that they will price them more favourably. It just reflects their view that all else equal, the long term risk is lower - it’s not necessarily ‘subsidized’ pricing. However, less ESG-centric investors don’t necessarily share the same view. The additional ‘pull’ to this market ‘push’ must come from the regulators since they are able to make it more attractive to issue especially given the high investor demand. The framework could achieve this through a whole range of considerations, such as greater regulatory clarity, grandfathering provisions, changes to p factors, adjusted STS criteria or even specific ESG STS ones.’’
Nevertheless, as PGGM states, data quality will be the main challenge.
Bradbury remarks: ‘’How would a bank know if any given corporate is not in adherence with any green standards without sufficient data? That said, certain ‘obvious’ green projects could be incentivized in principle already, given existing guidance on green classifications. Either data quality is less of an issue here due to the underlying or has already been addressed to some degree.’’
The EU’s SME supporting factor could be another model. European SMEs already have a supporting factor that reduces risk weights in the CRR. Utilizing a similar logic, regulators could expand the supporting factor for green projects, with green bond rules offering a complementary model for how this could work.
Stelios Papadopoulos
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News
Structured Finance
SCI Start the Week - 6 March
A review of SCI's latest content
Inaugural SRTx fixings released
The inaugural fixings for the SRTx (Significant Risk Transfer Index) have been released. The index values suggest that pricing volatility is rising and credit risk is worsening for US capital relief trades at a higher level than for European CRTs. For further information on SRTx or to register your interest as a contributor to the index, click here.
New SCI In Conversation podcast available
In this episode, Waterfall Asset Management partner Keerthi Raghavan discusses the headwinds and tailwinds currently facing the US ABS market. In a bonus feature marking International Women’s Day on 8 March, we also chat to Linklaters managing associate Ruhi Patil about what this year’s campaign theme - ‘embrace equity’ - means to her. The episode can be accessed wherever you usually get your podcasts, including Apple Podcasts and Spotify (just search for ‘SCI In Conversation’), and is available here.
Last week's news and analysis
Affordability anxiety
Non-QM originators augment affordability products, raising loss prediction
Back to STACR
Freddie targets 70/30 bonds versus reinsurance split as supply drops
Balance sheet optimization continues
Piraeus Bank discloses synthetic securitisation
Banks seek CRT clarity
"Reservation of authority" at heart of regulator distaste for CRT, say sources
Confidence and convenience
Octaura Holdings answers SCI's questions
Independent considerations
auxmoney, answers SCI's questions
Lightning rod?
Dealer incentives eyed in CAC complaint
Window of opportunity
German auto ABS dominates primary issuance
For all of last week’s stories including ‘Market moves’ and ‘Risk transfer round-up’ click 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.
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.
SRTx benchmark
SCI has launched SRTx (Significant Risk Transfer Index), a new benchmark that measures the estimated prevailing new-issue price spread for generic private market risk transfer transactions. Calculated and rebalanced on a monthly basis by Mark Fontanilla & Co, the index provides market participants with a benchmark reference point for pricing in the private risk transfer market by aggregating issuer and investor views on pricing. For more information on SRTx or to register your interest as a contributor, click here.
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
News
Capital Relief Trades
'Conflict of interest' undermines CRT
Lawyers ring alarm bells about possible impact of SEC ruling on CRT market
The US regulatory capital relief trade market appears in grave danger from the controversial “conflict of interest” re-proposal and release made by the Securities and Exchange Commission (SEC) at the end of January, say lawyers.
The language in the proposing release “raises significant concerns” about whether SPE CRT deals are classified as “conflicted transactions” under the rules, says Mayer Brown in a commentary on this issue.
The re-proposed Rule 192 is striking for the breadth of its putative coverage. It applies to not only “asset-backed securities” as defined in Section 3(a)(79) of the Securities Exchange Act of 1934 but also to synthetic asset-backed securities -which are not defined by either the 1934 act or Rule 192.
Moreover, swap transactions which will achieve a financial gain for the issuing bank if the ABS performs poorly are due to be prohibited under the new ruling. Central to the design of credit linked notes (CLNs) – which have been utilized thus far in the creation of US reg cap trades - is that the bank may be entitled to payments under the swap or financial guarantee issue by the SPE.
This indicates a great deal of difficulty for the US reg cap market.
"While the SEC has made the point that Fannie and Freddie are exempt from the definition of sponsor for their guaranteed ABS and thus their CRT deals are OK, the rest of release suggests that this kind of structure, where you have an SPE and a swap where a securitization participant ‘benefits’ from the adverse performance of an ABS or other asset which isn’t guaranteed by the federal government, isn’t something that SEC wants to happen,” says Michelle Stasny, a counsel at Mayer Brown in the Washington office.
Indeed, a passage from the release reads, “Under the re-proposed rule, the issuance of a synthetic ABS where a securitization participant enters into the short side of the transaction with the issuing entity of the synthetic ABS would be a ‘conflicted transaction’ because the securitization participant would be entitled to payment if the referenced assets and thus the ABS perform poorly.”
One of the major causes of disruption to the entire securitization market is the general uncertainty surrounding the impact of the re-proposal. At the moment, it appears no dealer or sponsor can enter into any ABS deal without being sure that it will not fall foul of the SEC.
“The biggest effect is the level of uncertainty as to the scope of the rule and the means of complying with the rule, especially for large organizations that have many business units, affiliates and subsidiaries. The SEC clearly doesn’t intend to shut down large portions of the securitization market and part of the comment letter process is to help them craft a final rule which is better tailored to the purpose of the underlying statute,” says Christopher Horn, a counsel at Mayer Brown in the New York office.
The US CRT market is already mired in regulatory uncertainty, mainly proceeding from the Federal Reserve, which has effectively shut down the sector for the last 18 months. A major bank has called for a no-objection letter to try to offer some clarity, say sources.
The possible effect of this new and sweeping raft of prohibitions from the SEC comes as a double whammy to the market.
The securitization industry as a whole is very perturbed about the impact so considerable push back is expected during the comment period, which ends March 27.
It’s possible that the defence issued by the industry will be so robust that the SEC will go back, revise the re-proposal and issue a new one more attuned to the original idea behind Rule 192 and one which offers less of a threat to the industry.
But that would be a best-case scenario and one in which perhaps too much faith should not be invested.
“I can’t see Chair Gensler liking that idea as much as moving to the final rule if he has the ability to do,” opines Stasny.
Simon Boughey
News
Capital Relief Trades
No good news
Powell's testimony suggests higher cap requirements not ruled out
There was little good news for financial markets during the first of Chairman Powell’s two day testimony before the Senate Finance Committee (March 6 and 7), but US banks will have been particularly perturbed to learn that additional capital requirements may be forthcoming.
Powell did not distance himself from the comments made last December by Vice Chair for Supervision Michael Barr to “holistically” review bank capital requirements, yet said he will be careful not to overdo it.
“It's always a balance. We know that higher capital makes banks safer and sounder. We also know that you will, at the margin, provide less credit the more capital you have to have, but I think it's never exactly clear that you're at perfect equilibrium," Powell said.
To experienced Fed watchers this indicates that “holistic” capital reviews and the potential for a greater burden is still very much on the table.
While not explicit, the tone of Barr’s speech in December suggested that lower capital requirements are not going to happen, and, if anything, could become heavier.
“Capital provides a cushion against unexpected risks and unforeseen losses, those a humble and sceptical person might be careful to not try to predict with too much precision. Those a humble and sceptical person might guard against.That is the spirit in which I am approaching the Fed's holistic review of capital standards,” he said.
Barr is the most important man in the Federal Reserve when it comes to shaping capital requirements.
Onlookers have formed the impression from comments such as these that additional capital requirements are on the cards. “Speeches by US regulatory leaders -- one from the Fed Vice Chair on Dec. 1 and another by the Acting Comptroller of the Currency on Jan. 17 -- support our view that regulatory requirements for capital levels for the largest lenders may increase in 2023,” wrote Bloomberg Intelligence senior government analyst Nathan Dean at the end of January.
This all comes at a time when USA regulators, either in the guise of the Federal Reserve or the Securities and Exchange Commission (SEC) are showing no inclination to allow reg cap trades by US banks to proceed unhindered.
“It’s interesting that regulators continue to at least threaten to increase capital requirements for large US banks, while preventing them from issuing SRT deals, comments a US market veteran today.
Simon Boughey
News
Capital Relief Trades
Corporate SRT launched
Nordea said to have finalized corporate SRT
SCI understands that Nordea, PGGM and Alecta have executed a repeat transaction called Sisu two. The trade is a follow up to a deal that the lender executed last year with the same investors (SCI 22 July 2022).
The previous transaction featured a 5.5% tranche thickness and referenced 500 borrowers. The deal was one of a slew of CRT trades that PGGM executed last year in various jurisdictions including Germany, Poland, and France.
One reason behind the Dutch pension fund’s record activity was the ability to offer more competitive pricing despite last year’s extensive widening (SCI 10 January).
Overall, pricing has widened last year for both first loss and mezzanine deals rendering even single digit mezzanine trades increasingly rare.
Stelios Papadopoulos
Talking Point
Structured Finance
SEC-SA and the death of public securitisation
Adam Croskery, head of debt financing and structuring at Arrow Global, calls for arrangers to create new public market offerings and help facilitate a deep and dynamic securitisation sector
In the early 2010s, I was a mortgage structurer at the forefront of the birth of NC2.0 (the non-conforming 2.0 sector). Even before then, I rated RMBS transactions at a major rating agency. If anyone should be a cheerleader for public securitisations, it’s me.
There is no doubt that public transactions are academically appealing (if somewhat exhausting) to put together and who doesn’t love a roadshow? Yet, having now headed up the debt function at Arrow for a number of years, we have issued a single public securitisation in my time here.
We use securitisation technology on a near daily basis. It’s the de facto form of finance from banks because of that pesky SEC-SA I reference in the title to this article. Besides that, us securitisation types get everywhere, so there is often a strong whiff of securitisation in many deals - even when they are backed by something that doesn’t constitute a financial asset.
While the SEC-SA is far from perfectly calibrated, regulators should be given credit for creating something that levels the playing field for European banks and increases the depth of the banking market for asset-backed financing.
When I started out, it was a market of ‘haves’ and ‘have nots’ – those that had an IRB model and those that had to make ends meet using the standardised approach. The IRB banks were able to offer bridge and acquisition financing on financial assets without a rating that made sense from an ROE perspective. Meanwhile, the standardised banks - absent a public rating - carried the risk-weighting of the underlying assets irrespective of how much overcollateralisation they had. Terms offered by standardised banks would have to be meaningfully better to incentivise a client to work with them because they then would have to take on the cost, time and execution risk of getting the deal rated, only to then refinance out a few months or a year later.
Looking back, the IRB banks were a relative handful at the time and they all had a very similar business model – to deploy their balance sheets to subsequently generate lead manager fees. The goal was to churn the balance sheet as fast as possible.
In general terms, the banks would set margins on their financing by reference to the public markets plus a spread. In that way, sponsors were incentivised to go down the public securitisation route because it made economic sense to do so.
With the advent of SEC-SA, there was a proliferation of truly viable bridge finance providers, with the competition resulting in the margin of warehouses over public deals tightening (and sometimes disappearing altogether). At the same time, alternative finance providers proliferated in Europe on the back of the vacuum left by banks exiting business lines following the GFC – to the extent that, in many instances, they now directly compete with banks on financing.
With all this going on, the incumbent banks – given the general pressures on bank capital – increasingly moved towards a syndication model, with secondary liquidity providers tending to be buy-and-hold. Warehouses and bridge financing terms became longer and the need to refinance into a public securitisation began to erode.
The current users of public securitisation fall into one of a handful of categories: jumbo deal buyers, where single finance providers can’t absorb the size; arbitrage, where you can take your basis off the table through the security transformation process; and, to an increasingly lesser extent, franchise.
At Arrow, we deeply appreciate CLOs, specialist resi, re-performers, UTPs and NPLs. But on their own, they won’t lead to a deep and dynamic securitisation capital market.
Indeed, given the competing finance sources for the same underlying, public markets will increasingly become purely a price-led alternative – one with a significant disadvantage relative to other options – the inherently higher frictional costs of a capital markets deal. Compounding this reality is the progressively shorter duration of securitisation bonds (directly and indirectly resulting from bank treasury LCR requirements) over which to amortise the establishment costs. Even the advantage of a lack of Euribor floor (which is prevalent in private financings) has fallen away for the time being.
The logical consequence of all of the aforementioned is that sector-agnostic players shall leave the market, lose the expertise to look at it, and pockets of liquidity will be permanently lost. Sector specialists will see their allocations shrink.
Yet, it doesn’t need to be this way. Despite a tough couple of years on the macro front, we see from the relative abundance of non-performing loan securitisations (and yes, business plans in many instances have been detrimental to the health of that segment) that where the SEC-SA isn’t well calibrated relative to the inherent risk of a proposition, the capital markets can be a value-additive instrument for all parties. NPLs are not the sole area where the calibration of the SEC-SA means banks struggle – development loans, fund NAV loans and various other ‘esoterics’ fall into this camp, among many others.
Just like my generation of structurers innovated with NC2.0 and arranged NPL securitisations before that was a thing, the ball is now in the court of the current crop of arrangers to create exciting new public market offerings and bring those of us who are slightly more jaded back to the table.
Market Moves
Structured Finance
BREP default an 'inflection point'?
Sector developments and company hires
BREP default an ‘inflection point’?
A senior loan EOD has occurred in connection with Finnish single-loan CMBS FROSN-2018, after Blackstone Real Estate Partners failed to repay the loan on 1 March (SCI ABS Markets Daily - 2 March). The episode marks one of the first high-profile securitisation defaults of the current cycle.
The FROSN-2018 loan had been granted a temporary extension last month, to allow the senior borrower and the servicer to consult on next steps, but no agreement was reached on the terms of any further extension of the senior loan maturity date. As such, the final maturity repayment default triggered a special servicing transfer event and the loan is now under special servicing.
BofA Global Research notes that the default occurred in the context of current less favourable credit conditions. “The reality is probably less dramatic than the headlines suggest, but we think the default could mark an inflection point for the performance of high beta credit assets as borrowers adapt to higher rates.”
In other news…
Barings to absorb DPI, MMAF
Massachusetts Mutual Life Insurance Company is set to transition its Direct Private Investments (DPI) unit and equipment ABS issuer MassMutual Asset Finance (MMAF) to Barings in 2Q23. The objective is to enable the businesses to scale their investment strategies with access to additional third-party institutional investors through Barings' global platform, while allowing Barings to provide a broadened set of complementary investment solutions to its clients.
DPI provides customised proprietary secured loans to private capital managers and funds backed by a range of private capital assets. The team has originated more than US$35bn in private direct investments since inception and will continue to serve its borrowers with the same standards of confidentiality.
MMAF originates, underwrites, funds and manages large-ticket capital equipment transactions throughout the US. Since inception, MMAF has funded more than US$20bn in new equipment purchases.
DPI and MMAF will report to Barings president Eric Lloyd, who oversees a diverse set of organisations, including cross-asset investment teams. The structure will enable the businesses to leverage the experience, capabilities and relationships across the Barings platform, while remaining separate business units.
Market Moves
Structured Finance
Hybrid stop-loss deal closed
Sector developments and company hires
Hybrid stop-loss deal closed
Swiss Re has closed its second hybrid bank financing and ILS transaction (SCI 22 April 2022). Building on the firm’s first innovative hybrid transaction from April last year, the latest multi-year stop-loss transaction provides Swiss Re with US$700m in underwriting protection for the financial years of 2023 to 2027, as it continues to pursue profitable growth.
Partnering again with JPMorgan and its institutional investor base, which financed the newly formed segregated account of the existing Matterhorn Re special purpose issuer vehicle, the transaction has been structured with the potential to increase up to a total of US$1bn. The transaction has been assigned stable ratings of Aaa/AAA/AAA by Moody’s, S&P and Fitch respectively.
In addition to enabling Swiss Re to grow its business in favourable market conditions, the deal is expected to have a positive benefit in terms of the firm’s regulatory and ratings capital requirements. The transaction is fully collateralised, with the proceeds to be held in notes issued by the EBRD.
In other news…
EMEA
Golub Capital is ramping up its European expansion with the recruitment of three private credit professionals to its London-based team. Daniel von Rothenburg, Philipp Schroeder and Mensah Lambie will strengthen the firm’s relationships with sponsors in the region.
Joining the business development and investor relations team, von Rothenburg will serve as md and head of EMEA, having previously operated as md at New End and Oaktree Capital. Schroeder and Lambie will both join the direct lending team as senior director and principal respectively, having served on the direct originations team and as principal at Apollo Global Management.
Norton Rose Fulbright has appointed a new partner to its capital markets team as it continues to grow its securitisation practice. Christian Lambie joins the firm in London and will work alongside securitisation partner, David Shearer.
Lambie brings extensive experience as a securitisation lawyer to the new role, with expertise in CMBS, RMBS and restructuring distressed transactions. In his previous roles as partner at Allen & Overy and most recently as legal counsel at Morgan Stanley, he served in an advisory capacity to several market-first transactions.
Westlake takes on ACC leases
Westlake Portfolio Management (WPM) has agreed to service leases originated by American Car Center (ACC), after ACC ceased operations on 24 February. However, not all leases have been transferred to WPM at this time and KBRA understands that ACC is exploring options to appoint a sub-servicer for the remaining ACC leases, which include those that collateralise the three outstanding ACC auto ABS. In addition, ACC has hired a number of prior employees as consultants with ACC servicing and information technology experience to collect payments, facilitate the servicing transfer and produce reporting required by the outstanding securitisations.
ACC has previously reported to KBRA that it had a managed portfolio of over 44,000 active customer accounts, with an aggregate lease principal balance of US$627.9m, as of 31 December 2022. Based on the February distribution reports, there were 23,805 securitised accounts with a value totaling approximately US$285m across the three outstanding ACC Trust securitisations.
KBRA last month placed six ratings on watch developing across three KBRA-rated ACC securitisations, which were in addition to two ratings already on watch downgrade owing to deteriorating performance.
Market Moves
Structured Finance
ICE merger challenged on 'competitive harm'
Sector developments and company hires
ICE merger challenged on ‘competitive harm’
The US FTC is seeking to block the proposed merger between Intercontinental Exchange (ICE) and its top competitor, Black Knight (SCI 5 May 2022). The regulator claims that the merger would drive up costs, reduce innovation and reduce lenders’ choices for tools necessary to generate and service mortgages.
ICE owns the dominant mortgage loan origination system (LOS) in the US, called Encompass. Black Knight owns the second largest LOS in the US, known as Empower. In the FTC’s complaint, it alleges that the merger - by eliminating Black Knight as a competitor - would allow ICE to raise costs to lenders, which would then be passed to homebuyers.
Black Knight has proposed to remedy the competitive harm resulting from the proposed deal by selling its Empower LOS and some related services to a technology company, Constellation Web Solutions. According to the complaint, however, the proposal does not address the anticompetitive effects in the market for product pricing engine software and would not replace the intense competition between ICE and Black Knight in the LOS market.
ICE says that it strongly disagrees with, and will vigorously oppose, the FTC’s challenge. The company notes that in many public forums, it has outlined its vision for a more equitable housing finance system - one which is currently “fraught with inefficiencies, cybersecurity vulnerabilities, unnecessary delay and requires robust digitisation to lower costs for all participants”. It adds that the deal with Black Knight - which is intended to automate, streamline and increase transparency in the mortgage industry - will help achieve that vision.
“ICE is fully confident in our position and looks forward to presenting it in court. While that litigation plays out, the company is continuing its work toward closing the acquisition, which it expects to complete in the third or fourth quarter of this year,” the company states.
In other news…
Schroders debuts UK LTAF
Schroders Capital is set to launch the UK’s first Long-Term Asset Fund (LTAF), having received regulatory approval from the UK’s FCA. LTAFs are regulated open ended investment vehicles designed to enable a broader range of investors, with longer-term horizons, to invest efficiently in illiquid and private assets (SCI 7 May 2021). The firm says it will focus on providing defined contribution (DC) and other eligible investors with the opportunity to access the breadth of its private asset investment capabilities.
Simmons & Simmons advised Schroders Capital on the structuring, launch and FCA authorisation of the LTAF. Simmons was the only law firm represented on the Productive Finance Working Group, established by the Bank of England, the FCA and HM Treasury to develop practical solutions to the barriers to investing in long-term, less liquid assets.
The FCA notes that the ability to invest in illiquid assets - through appropriately designed and managed investment vehicles - is important for supporting economic growth and the transition to a low carbon economy. The authority is currently inviting views on ideas about how to further improve asset management regulation with a more modern and tailored regime, to ensure the regime takes account of developments in technology and supports innovation.
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