News Analysis
RMBS
Securitising shared ownership
RMBS plugging gap left by end of Help to Buy scheme
Growth in the UK shared ownership housing sector is fuelling a spike in interest in new RMBS products, as the government-backed Help to Buy equity loan scheme draws to a close. The final deadline for the government scheme – intended to facilitate home ownership among borrowers with steady incomes but limited ability to raise substantial deposits – passed at the end of March.
“The open question people have is: ‘What replaces that?’ Unless there is a significant correction of house prices, the underlying need for a product like Help to Buy doesn’t go away,” says Alastair Bigley, a senior director on the EMEA RMBS team at S&P. He suggests capital markets are showing an appetite to fill that gap.
According to government statistics compiled by S&P, shared ownership accounts for around 202,000 properties in the UK, 76,500 of which were added to the market between 2016 and 2021. The Help to Buy scheme has certainly played a role in boosting this growth. As it draws to a close, shared ownership RMBS is emerging as a new asset class to support borrower demand.
Over the past two years, S&P has seen a significant increase in enquiries over how it would analyse such portfolios, Bigley says, with demand coming from both housing associations and lenders. “Building societies and banks have historically been – and continue to be – the main lenders in the space, but some non-banks have started launching products over the last 18-24 months,” he notes. “The volume of conversations we have had with regard to the space have stepped up noticeably over that period. The broad view is that these products are going to be what people turn to with Help to Buy ending.”
Unlike conventional mortgages, shared ownership sees a registered provider – such as a housing society – owning and renting part of a property to somebody, who in turn owns the rest of the property. In practice, this means borrowers have to raise a smaller deposit of at least 5%, compared with the typical 10%-15% required for a standard mortgage.
First introduced in the UK after the 1980 Housing Act, the model has gained traction in the UK housing market in recent decades. This has particularly been the case in high-cost urban areas, where public workers - such as teachers, nurses, police officers or firefighters - struggle to afford properties. The Help to Buy scheme, introduced in 2013, made it more viable still, with loans effectively being interest free for the first five years.
However, shared ownership mortgages have a different risk profile from traditional mortgages, Bigley says. “From a borrower’s standpoint, monthly cashflows are part rental and part mortgage payments. In terms of default risk, if you have a buy-to-let mortgage and the tenant doesn’t pay, that tenant can be replaced. With shared ownership, the two are linked. If a borrower doesn’t pay their rent, it creates issues in terms of potentially defaulting on the mortgage, even though they might be up to date on their mortgage.”
The complexities are also greater for a housing association, Bigley says, explaining that if rent is in arrears, “it is not as simple as just finding a new tenant”. In those instances, the housing association and the mortgage provider will typically work together to reach a scenario that suits all parties, including the borrower. However, repossessions can and do still happen.
Despite these different characteristics and risk profiles, Bigley says that there are also consistencies with conventional residential mortgages. It follows that this provides a foundation for ratings agencies to work from, as well as reassurance to lenders, RMBS issuers and investors for the emerging asset class.
From a regulatory perspective, shared ownership mortgages are underwritten as any other mortgage would be, he explains. “[In any mortgage application] the lender has to take into account other expenses over and above mortgage repayments. In a shared ownership scenario, the rental portion becomes part of this equation. And the LTV remains based on the overall value of the property, rather than the percentage acquired by the borrower.”
For both issuers and investors, the asset class offers a strong social benefit in an environment where ESG is still very much front of mind. From a new product perspective, its ability to provide an underserved part of the population with access to home ownership is proving important in fuelling market interest, says Bigley.
“Of course, there are then questions as to how the product is securitised, which would in turn determine whether it could be classified as a social bond,” he adds. “You could have some shared ownership as part of a wider, more diversified portfolio. The alternative, which is less likely at the moment because we’re probably not there yet in terms of volumes, is that you could have an entirely shared ownership portfolio.”
It remains to be seen whether shared ownership mortgages become a standard ESG-positive component in UK RMBS portfolios or an outright impact-focused and standalone play. For now, it seems the end of Help to Buy is creating an opportunity for the RMBS market to pick up where the government left off.
Kenny Wastell
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News
Structured Finance
SCI Start the Week - 3 April
A review of SCI's latest content
Last week's news and analysis
Credit protection continues
UBS takeover leaves Elvetia notes unaffected
Fair winds
CRT issuance hits all-time record
IBRD prints largest-ever cat bond
Unique transaction provides earthquake coverage for Chile
Maturity extensions
Credit Agricole lengthens maturity in new SRT
Merchants joins the party
Brand new US SRT deal from Merchants Bank of Indiana
On the wing
Gryphon to expand into new areas of structured finance post-acquisition
Refinancing plans
European CMBS noteholder scrutiny to increase
SCI In Conversation podcast: John Pellew, Arrow Global
We discuss the hottest topics in securitisation today...
For all of last week’s stories including ‘Market moves’ and ‘Risk transfer round-up’ click here.
Recent premium research to download
CRT 2022 review - March 2023
CRT issuance volumes broke all-time records last year and the pipeline continues to build. The only potential blots on the horizon are the regulatory pause in the US and the fallout from the collapse of Credit Suisse and Silicon Valley Bank, as this Premium Content article suggests.
CLO ESG reporting - March 2023
CLO managers are increasingly investing in their own methodologies and disclosure processes to provide investors with helpful ESG information. However, as this Premium Content article shows, the subjective nature of this data remains an issue.
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.
All of SCI’s premium content articles can be found here.
SCI In Conversation podcast
In the latest episode, Arrow Global principal John Pellew discusses the evolution of blockchain technology in the securitisation market. We highlight the milestone achievements in the space, as well as the challenges that still need to be overcome.
The podcast can be accessed wherever you usually get your podcasts, including Apple Podcasts and Spotify (just search for ‘SCI In Conversation’), or by clicking 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.
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.
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25 April 2023, London
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News
Capital Relief Trades
Risk transfer round up-3 April
CRT sector developments and deal news
Deutsche Bank is believed to be readying a synthetic securitisation of corporate loans from the CRAFT programme that is expected to close in 2Q23. The last CRAFT transaction closed last year (see SCI’s capital relief trades database). Deutsche bank declined to comment.
Stelios Papadopoulos
News
Capital Relief Trades
Magnetar mooted
Illinois-based investor denies buying Merchants Bank SRT
Magnetar Capital, an Illinois-based asset manager, has denied strong rumours that it was the buyer of the SRT from Merchants Bank of Indiana, reported last Friday.
Well-placed market sources had suggested that it had been the investor, but Magnetar says otherwise.
The firm was founded in 2005 and had $12.6bn AUM on 31/12/2022. It has over 200 employees in Evanston, Illinois, Houston, Texas, New York and London.
The deal from Merchants Bank of Indiana was priced at SOFR plus 15.5%, which, it has been suggested, is generous in comparison with other recently seen SRT deals.
On the other hand, the assets, which are bridge-to-HUD loans to the healthcare commercial real estate (CRE) sector, are viewed as riskier than others and the gearing of this trade is quite high. The face value of the transaction is $155m while the pool is only $1.13bn.
“I would say this is a high risk, high reward deal,” says one SRT buyer.
Bridge to HUD, (Housing and Urban Development) loans, give developers immediate financing while they wait for HUD money to come through. Traditional CRE lending can close within two or three months, but HUD loans can take from six months to well over a year.
This is the first time that CRE loans have been securitized in the nascent US SRT market, say sources, but it is believed that Merchants Bank did a bridge-to-HUD multi-family loan SRT securitization early last year.
Moreover, US regional banks have been under considerable pressure lately, to the extent that several onlookers were surprised to see any US bank in the SRT market. These factors are also likely to have inflated the yield.
Simon Boughey
News
Capital Relief Trades
Corporate CRT launched
MUFG opts for static pool in new CRT
MUFG Bank has executed a five-year synthetic securitisation that references a static US$1.7bn portfolio of US, European and Asian corporate loans. Dubbed Monolith three, the transaction differs from last year’s Monolith two given the shift from a revolving to a static portfolio.
The transaction features a 0%-7% first loss tranche thickness and a 7%-26% mezzanine thickness. The tranches amortize on a pro-rata basis with triggers to sequential amortization and there are no time calls. The mezzanine tranche is unusually thick for synthetic risk transfer trades, but this is explained by the fact that MUFG is already factoring in the Basel output floor into the trades. Consequently, the thickness of the mezzanine tranche had to be adjusted to reach the 15% floor for the retained senior tranche.
Under the output floor, a bank using internal models must now calculate RWAs using the standardised approach and then multiply the amount obtained by 72.5%. Effectively, this may lead to higher risk weights for the retained senior tranches of synthetic securitisations (SCI 22 November 2022).
Kenji Matsumoto, director, credit portfolio management at MUFG comments: ‘’We received a request to close the transaction by the end of March which is the closing of the fiscal year for Japanese banks. We opted for a static pool which is more straightforward to structure from an operational standpoint and has a more attractive risk profile for investors. Moreover, there’s no time call otherwise the maturity would have to be adjusted to account for the inclusion of the call.’’
Looking forward, Matsumoto concludes: ‘’Synthetic securitisations are quite attractive given the benefits in terms of ROE enhancement and RWA relief, but it requires a certain budget and strategic planning.’’
Stelios Papadopoulos
News
Capital Relief Trades
German SRT debuts
OLB executes first synthetic securitisation
OLB has executed a synthetic securitisation of corporate loans. The transaction is the German bank’s first synthetic risk transfer trade and is riding a wave of capital relief trades from the German Landesbanken.
According to market sources, the sold mezzanine tranche was sized at €50m-€70m and priced in the double digits. The transaction is the latest significant risk transfer trade from a German Landesbank following deals by Helaba, LBBW and Bayern LB last year (see SCI’s capital relief trades database).
The trade has enabled the bank to reduce its risk-weighted assets by up to €450m and improved the CET1 ratio by around 40bps. OLB plans to further grow the use of synthetic technology and use the capital released from the transaction for organic and inorganic growth, including the financing of the acquisition of Degussa Bank which was announced in September 2022. Degussa Bank serves individual and business borrowers across a broad range of financial products. The lender is a so called ‘’worksite bank’’ offering banking branches for employees on the premises of partner companies in Germany.
Degussa Bank’s regional retail customer focus on industrial and economic centres in Western and Southern parts of Germany is complementary to OLB’s core presence in the North of Germany and adds scale to OLB’s retail banking franchise across the country. Upon completion, the acquisition will allow OLB to expand its client base by approximately 340.000 clients.
Unicredit acted as the arranger in the transaction.
Stelios Papadopoulos
News
CLOs
Libor laggards
Most US CLOs yet to transition from Libor with less than 90 days to go
Only 19% of US CLOs rated by S&P have transitioned to SOFR, leaving less than three months for the remainder to do so before the deadline of June 30, according to a report by the rating agency this week.
While it’s not impossible for the bulk of deals to make this transition in under 12 weeks, it is clearly leaving until the last moment.
“We think that there are processes in place to make this happen, but there is a lot of paperwork and cost involved to make sure it all goes smoothly. We think managers can deal with it but we can’t guarantee there will be no issues, ” says Yann Marty, director, S&P Global Structured Finance Ratings.
The 81% of deals rated by S&P yet to make the move to SOFR represents about 900 separate deals, the great bulk of which of which have Alternative Reference Rates Committee (ARRC)-like transition language. Only about 170 CLOs have made the switch.
The major complicating factor has been the slowness of the syndicated loan market to move to pricing over SOFR. Without this in place, CLO tranches can’t be marked against SOFR. The inherent reluctance to move to SOFR has been exacerbated by overall market conditions and, in particular, the rise in rates.
At the end of March 31, the average US CLO transaction had only about 35% of its assets tied to SOFR.
Of the 19% of CLOs which have moved to SOFR, 13% originated from new issuance which had SOFR as the loan benchmark. Around 3% transitioned as a result of refinancing or reset, but, as S&P notes, this has been “extremely slow over the past year with current market condition uncertainties.”
Another 2% have transitioned due to a supplemental indenture while a paltry 1% have transitioned as a result of the benchmark trigger being reached - meaning that 50% of the portfolio assets are indexed to SOFR rather than Libor. To date, only middle market CLOs have achieved transition through this route.
US dollar Libor was given a fresh lease of life – or sorts – this week when it was announced by the Financial Conduct Authority (FCA) that one month, three month and six-month Libor will continue to be published until September 30 2024 using an “unrepresentative synthetic methodology.”
The extension is designed to assist the smooth functioning of the structured products market which reference US dollar Libor but are governed by UK law. Dollar contracts governed by US law are required, under the terms of 2022’s Libor Act, to move to SOFR.
Synthetic Libor could also apply to those contracts which have specific fallback language and are thus beyond the terms of the Libor Act.
“If the fallback language says, for example, ‘if there is a Libor page then use that and if not go to Prime’ then these contracts could use synthetic Libor for the next year and a quarter. It’s helpful for contracts that otherwise are going to use Prime but need more time to select another rate. Parties have gotten behind the eight ball here,” says Amy McDaniel Williams, a partner at Hunton Andrews Kurth
Synthetic Libor is to be calculated using term SOFR, plus a fixed spread adjustment. The spreads stand at 11.448bp for one month, 26.16bps for three months and 42.82bps for six months. These levels are exactly the same as were specified by the Libor Act, so there will be no practical difference between transitioning to SOFR or not.
However, the survival of Libor, albeit in a synthetic form, muddies the waters still further and will give encouragement, it is argued, to delay the switch to SOFR even further.
But given the enormous backlog of deals which have not transitioned to term SOFR yet, there seems to have been little alternative.
“There were too many contracts which would have difficulty transitioning in the time frame, so this was the solution,” says Williams.
Synthetic sterling Libor was also instituted for RMBS deals that found it very difficult to make the switch, and there are currently about 20 deals outstanding which use this synthetic rate rather than SOFR.
Simon Boughey
News
SRTx
Latest SRTx fixings released
Index values reflect recent banking volatility
The latest fixings for the SRTx (Significant Risk Transfer Index) have been released. The most significant change in the index values since March’s fixings (SCI 3 March) is that – perhaps unsurprisingly, given recent volatility in the bank sector - spreads have widened across all segments, except European SMEs.
This month’s survey responses suggest that spread estimates have widened by 6bp (representing a +0.6% change) and 67bp (+7.7%) for European and US large corporate transactions respectively, and by 22bp (+2%) for US SME transactions. In contrast, spread estimates for European SME transactions have tightened by 42bp (-3.3%).
The SRTx Spread Indexes now stand at 1,100bp, 929bp, 1,233bp and 1,139bp for the SRTx CORP EU, SRTx CORP US, SRTx SME EU and SRTx SME US indexes respectively, as of the 3 April valuation date.
For the SRTx Volatility Indexes, while the values show a decline of between 10% and 22.2% month-on-month for US large corporates and European and US SMEs, most values remain above 50 – suggesting that the bias is for higher levels of volatility in the near term. The outlier is European large corporates, estimates for which increased by 10%.
The SRTx Volatility Index values now stand at 55, 56, 44 and 55 for the SRTx CORP VOL EU, SRTx CORP VOL US, SRTx SME VOL EU and SRTx SME VOL US indexes respectively.
Meanwhile, the SRTx Liquidity Index values point to worsening sentiment across the board, rising in a range between 12% and 30%. The indexes now stand at 65, 70, 65 and 70 across SRTx CORP LIQ EU, SRTx CORP LIQ US, SRTx SME LIQ EU and SRTx SME LIQ US respectively.
Finally, the SRTx Credit Risk Index values rose for large corporates (by 1.8% for Europe and 9.1% for the US), declined for European SMEs (by 13.8%) and remained the same for US SMEs. The indexes now stand at 70, 75, 70 and 75 across SRTx CORP RISK EU, SRTx CORP RISK US, SRTx SME RISK EU and SRTx SME RISK US respectively.
SRTx coverage includes large corporate and SME reference pools across the EU and US economic regions. The index suite comprises a quantitative spread index - which is based on survey estimates for a representative transaction (the SRTx Benchmark Deal) that has specified terms for structure and portfolio composition - and three qualitative indexes, which measure market sentiment on pricing volatility, transaction liquidity and credit risk.
Specifically, the SRTx Volatility Indexes gauge market sentiment for the magnitude of fixed-spread pricing volatility over the near term. The index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating volatility moving higher.
The SRTx Liquidity Indexes gauge market sentiment for SRT execution conditions in terms of successfully completing a deal in the near term. Again, the index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating that liquidity is worsening.
Finally, the SRTx Credit Risk Indexes gauge market sentiment on the direction of fundamental SRT reference pool credit risk over the near term. The index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating that credit risk is worsening.
The objective of the index suite is to depict changes in market sentiment, the magnitude of such change and the dispersion of market opinion around volatility, liquidity and credit risk.
The indexes are surveyed on a monthly basis and recalculated on the last trading day of the month. SCI is the index licensor and the calculation agent is Mark Fontanilla & Co.
For further information on SRTx or to register your interest as a contributor to the index, click here.
Corinne Smith
Market Moves
Structured Finance
UCI's sustainable finance strategy supported
Sector developments and company hires
UCI’s sustainable finance strategy supported
The EIB Group and Instituto de Crédito Oficial (ICO) have disclosed their participation in UCI’s recent RMBS Green Prado XI, which was partially preplaced last month (see SCI’s ABS Markets Daily – 23 March). Under the transaction, the two organisations aim to promote the renovation and construction of homes using sustainable criteria in Spain and Portugal. The transaction complies with the STS framework and Sustainalytics’ Green Bond Framework.
The EIB Group will make an investment commitment of €240m, €200m of which - split into €121.4m for the class A notes and €78.6m for the class Bs - has already been disbursed by the EIB. The EIF intends to implement its €40m commitment in the most senior class in the coming weeks. Meanwhile, ICO is investing €100m in the class A notes.
The funding will extend access to new green and sustainable loans to individuals and condominiums that are investing in building renovations. Mortgage loans for the purchase of homes meeting high energy-efficiency standards will also be eligible.
According to UCI estimates, the final energy savings generated by the deal in Spain and Portugal are expected to be 396GWh a year and 100,904 tonnes a year of CO2, equivalent to the annual energy use of 28,937 households. The project will also provide an additional boost to the European Local Energy Assistance (ELENA) programme, which offers technical assistance for energy efficiency, renewable energy and sustainable urban transport projects.
In other news…
EMEA
KBRA has promoted Killian Walsh to md, ABS, based in Dublin. He was previously senior director at the rating agency, which he joined in December 2019. Before that, Walsh was director, securitisation at ING.
North America
Flexpoint Ford has appointed David Moffitt senior advisor – operating partner, based in New York. He was previously US co-head of credit management at Investcorp, which he joined in September 2020. Before that, Moffitt worked at LibreMax Capital, JC Flowers and Morgan Stanley, among other firms.
‘Synthetic’ Libor settings to continue
Further to its November 2022 consultation (SCI 23 November 2022), the UK FCA has decided to use its powers under the UK Benchmarks Regulation (UK BMR) to require ICE Benchmark Administration (IBA) to continue the publication of the one-, three- and six-month US dollar Libor settings using an unrepresentative ‘synthetic’ methodology. The FCA will require IBA to publish these settings for a temporary period after 30 June 2023, following the end of the US dollar Libor bank panel, and intends for them to cease on 30 September 2024.
From 1 July 2023, all new use of ‘synthetic’ US dollar Libor by UK supervised entities will be prohibited under the UK BMR, although its use will be permitted by supervised entities in all legacy contracts, except for cleared derivatives.
IBA is also currently required by the FCA to publish the three-month ‘synthetic’ sterling Libor setting, which the FCA expects to cease on 28 March 2024.
Market Moves
Structured Finance
Strategic partnership to boost CLO platform
Sector developments and company hires
Strategic partnership to boost CLO platform
TCW has entered into a strategic partnership with Lakemore Partners, with the aim of supporting the growth of TCW’s CLO platform. Lakemore primarily invests in super-majority control CLO equity.
Under the agreement, Lakemore will make a material equity investment in the TCW CLO platform, providing equity for the issuance of multiple CLOs over the next several years. Through this investment, Lakemore will gain preferred access to the TCW CLO platform and its pipeline of new issue CLO transactions, providing enhanced certainty of execution and a path towards significant CLO platform growth.
In other news…
EMEA
Aaron Scott has joined Dechert as a partner in its global finance practice, based in London. Scott specialises in structured finance, with a focus on CLOs. He trained and worked as a lawyer in New Zealand, before moving to London, where - prior to joining Dechert - he was an associate in the structured finance practice of Paul Hastings.
Moody’s has promoted EMEA structured finance associate md Michelangelo Margaria to Italy country head, based in Milan. He joined the rating agency as svp in March 2002, having previously been a credit structurer at UBS.
Law firm TLT has further expanded its national structured finance practice with the appointment of Steve Downey as a partner, based in London, following the appointment in December of fellow partner Mark Thomas. Bringing the number of partners in the team to seven, these latest appointments form part of the firm’s strategic plans to continue growing its UK-wide banking and structured finance offering.
Downey joins TLT from Squire Patton Boggs, where he was a legal director. He has over 15 years’ experience working as a City lawyer, including at DLA Piper and Sidley Austin.
Thomas, who co-heads TLT’s structured finance team alongside Rich Hughes, was formerly head of structured finance at Squire Patton Boggs and worked at Addleshaw Goddard before that.
VdA Vieira de Almeida has promoted NPL ABS lawyer Sebastião Nogueira to managing associate within the banking and finance department. Based in Lisbon, he was previously senior associate at the firm, which he joined in September 2013.
North America
Miroslav Visic has joined Canada Life as director, global assets structuring, with a focus on CLOs and CFOs. Based in New York, he was previously head of structured credit with the Gulf Credit Opportunities Fund and before that, worked at Guggenheim Partners, Mizuho, Deutsche Bank, Deloitte & Touche and Fitch.
Market Moves
Structured Finance
AssuredIM, Sound Point create CLO powerhouse
Sector developments and company hires
AssuredIM, Sound Point create CLO powerhouse
Assured Guaranty has announced an agreement with Sound Point Capital Management, pursuant to which Assured Guaranty will contribute its entire equity interest in Assured Investment Management and - with certain exceptions - its related asset management entities to Sound Point. In addition, US insurers Assured Guaranty Municipal Corp and Assured Guaranty Corp will engage Sound Point as their sole alternative credit manager to invest US$1bn over time in alternative credit strategies, including nearly US$400m currently managed by AssuredIM, as of 31 December 2022. In exchange, Assured Guaranty will receive a 30% ownership interest in the combined business, subject to potential post-closing adjustments.
Assured Guaranty acquired AssuredIM (formerly BlueMountain Capital Management) in October 2019 (SCI 9 August 2019). AssuredIM will transfer assets under management of approximately US$15.2 billion, including approximately US$14.5bn of CLOs, to Sound Point upon completion of the transaction. As a result, Sound Point - which had approximately US$21.4bn in CLOs and US$32bn in total AUM, as of 31 December 2022 - is expected to become the fifth largest CLO manager by AUM in the world.
Assured says the combination advances two of the objectives the firm set out when it entered the asset management business. The first objective was to establish a fee-based earnings stream independent of the risk-based premiums generated by its financial guaranty business. The second objective was to enhance the alternative investment opportunities for its financial guaranty subsidiaries’ investment portfolios.
Assured expects the transaction to be immediately accretive to earnings per share, return on equity and book value per share, as well as the company's adjusted operating shareholders’ equity per share and adjusted book value per share. It also plans to continue its current capital management programme, including share repurchases.
The transaction is expected to be completed in 3Q23, subject to certain customary closing conditions. Following closing, Assured president and ceo Dominic Frederico will be appointed to the Sound Point board of managers.
In other news…
MBS ETF pair debuts
DoubleLine Capital has launched a pair of actively managed MBS ETFs - the DoubleLine Mortgage ETF (DMBS) and the DoubleLine Commercial Real Estate ETF (DCMB).
The objective of DMBS is to seek total return that exceeds the total return of its benchmark, the Bloomberg US Mortgage-Backed Securities Index, over a full market cycle. The Mortgage ETF invests primarily in high-quality investment grade RMBS, allocating between agency and non-agency MBS.
Portfolio managers of the Mortgage ETF are Jeffrey Gundlach, founder, ceo and cio of DoubleLine; Vitaliy Liberman, portfolio manager overseeing DoubleLine’s agency MBS team; and Ken Shinoda, chairman of the firm’s structured products committee and portfolio manager overseeing the non-agency RMBS team.
The objective of DCMB is to seek current income and capital preservation, with long-term capital appreciation as a secondary objective. The fund invests in senior investment grade CMBS and employs active management through security selection across CRE property types and subsectors, while maintaining a low level of interest rate risk. The investment universe includes high-quality CRE debt across agency CMBS, non-agency CMBS and CRE CLOs.
Portfolio managers of the Commercial Real Estate ETF are Morris Chen, who heads DoubleLine’s CMBS and CRE debt team; Mark Cho, portfolio manager responsible for the team’s CMBS credit platform; and Robert Stanbrook, portfolio manager responsible for the team’s CRE loan platform, as well as its investments in CRE CLOs.
North America
Marathon Asset Management has appointed Jennifer Wildeman and Thorne Gregory as mds, dedicated to providing client services and solutions. Wildeman has over 16 years of experience serving as a private markets specialist and advisor to institutions. Prior to Marathon Asset Management, she was an md at ACORE Capital, responsible for investor relations as well as product and business development.
Gregory has over 30 years of experience in investment banking, corporate finance and institutional client management. He rejoins Marathon Asset Management, where he worked from 2010 to 2017, and has experience from JPMorgan in the financial institutions group and in a broad range of private markets strategies at Fortress Investment Group, Alcentra and Partners Group.
Signature, SVB portfolio dispositions underway
The FDIC, as receiver of the former Signature Bank and Silicon Valley Bank, has retained BlackRock Financial Market Advisory to undertake a marketing process to sell the securities portfolios retained from the two receiverships. The face values of the two portfolios are approximately US$27bn and US$87bn respectively, primarily comprising agency MBS, CMOs and CMBS. The portfolio sales, which will be gradual and orderly, will aim to minimise the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions.
The FDIC has also announced the framework of a marketing process for the approximately US$60bn CRE loan portfolio retained in the Signature Bank receivership, which includes a concentration of multifamily properties, primarily located in New York City. The Corporation notes that it has a statutory obligation to maximise the preservation of the availability and affordability of residential real estate property for low- and moderate-income individuals. As such, it is currently reviewing the CRE loans secured by multifamily residences that are rent stabilised or rent controlled and plans to reach out to state and local government agencies, as well as community-based organisations, to seek their input as the FDIC develops its marketing and disposition strategy.
The FDIC has retained Newmark & Company Real Estate as an advisor on this sale, with marketing of the portfolio expected to begin later this summer.
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