Contents

CMBS

Litigation looms

Investor disputes to rise as CMBS valuations decline

Plummeting commercial real estate valuations in the US may trigger a rise in litigation as investors battle over control rights in CMBS. However, an additional risk is emerging that contracts may not be interpreted as expected.

“I see a greater willingness to push back, as there is so much more at stake now,” suggests Davis+Gilbert partner Joseph Cioffi. “Parties will fight strenuously over what the proper valuation should be [and] how to interpret the documents.”

Rising interest rates have triggered a decline in valuations across the commercial real estate market. However, the office sector is causing the most concern, having overtaken retail to become the new ‘problem child’ of the CMBS market (SCI 6 July).

“Retail, in particular malls, aren’t out of the woods yet,” says Cioffi. “There are still a number of pressures, including inflation and the shift to online purchases – but it certainly doesn’t compare to what’s happening in the office sector.”

Out of the US$750bn in outstanding office loans, US$190bn are set to mature in 2023 and a further US$117bn in 2024. Overall, office properties account for 14% of CRE assets in the US.

Coupled with inflation-driven hikes in operating costs, declining office occupancy as a result of shifting hybrid working habits have placed immense pressure on office valuations. “There’s a lot of pressure on the valuation of office buildings – more so than any other area – and that can be a catalyst for litigation because valuation is a core concept within the CMBS space,” explains Cioffi. “Lower valuations will trigger changes of control under the deal documents, which is probably the main thing to be on the lookout for. If you have a default because of all the pressures in the economy, that can trigger an appraisal reduction event – so there can be disputes over whether that default event occurred or not, the appraisal amount, and the consequences of the appraisal if it is deemed a reduction.”

Such disputes can affect voting rights, control of the servicer and distributions under the CMBS transaction. Cioffi continues: “There are a lot more variables now because of the uncertainty during these times of changing trends in office use. This is going to lead to larger swings in valuations and, as a result, more disputes because the variables at play are subject to different interpretations.”

Nevertheless, past litigation can provide a blueprint for which arguments have prevailed in previous disputes, although variations in the outcome of these offer no clear insight into which way future CMBS cases may swing.

The outcome of a previous battle over appraisal reduction amounts and whether a shift in control rights had occurred - FCCD Ltd. v. State St. Bank & Trust Co. - was determined on the lacking ambiguity of contract. As well, in the case of LNR Partners, LLC v. C-III Asset Mgmt., the property settlement agreement was understood to be too ambiguous on the consideration of an appraisal reduction in determining voting rights.

“The precedent doesn’t benefit a senior certificateholder or a junior or a subordinate certificateholder. What it does is show us the importance of the contract language and how it can be interpreted in different ways,” Cioffi observes.

The case-by-case nature of previous CMBS disputes highlights that the long-term takeaway from any surge in litigation activity for investors is likely to lie with the writing of the contract rather than with the investments themselves. “I expect people will be more cautious in terms of new deals going forward,” Cioffi indicates. “There should be more of a focus on the language and investors should really be looking at the cases that have been decided already to determine how their particular contract’s language would fall out if they were to face litigation.”

CMBS litigation is also affected by the case law in other ABS sectors. For example, Cioffi believes that decisions made in RMBS cases could have a major impact on all securitisation litigation going forward. “CMBS will be influenced by litigation that has occurred in other areas, like RMBS, and those pieces also provide a roadmap for CMBS. Parties can look at the RMBS cases, look at the changes in the law and use them to their advantage or plan ahead.”

Legal changes arising from litigation connected to pre-financial crisis subprime RMBS have impacted potential litigation and future deal structures for consumer ABS from the onset of rising consumer debt and inflation.

These takeaways can provide a clearer angle within future disputes for CMBS too. Namely, on the matter of materiality, differing legal interpretations of ‘material and adverse effect’ led ABS deal documents to outline specific cases of what would be a material breach of a specific representation and warranty.

However, CMBS is different in that it is ultimately dependent on valuations. “Whether the dispute is about valuation or the trigger event, you can’t avoid the significance of valuation and its consequences,” Cioffi remarks.

Office CMBS portfolios with higher exposure to areas with older building stock may be at the most risk for litigation. “Older buildings are more at risk, as they don’t have the newest and greatest amenities. It is harder to occupy a building that needs more investment – and they are pitted against something newer and better available in the market right now. Those are the things to be wary of – less desirable, older buildings in markets where you have higher vacancy rates,” Cioffi concludes.

Claudia Lewis

Asset-Backed Finance

After the gold rush

Digital revenues resuscitate music royalty ABS

With the European summer festival season in full swing and rocket man Elton John announcing his retirement from live music, securitisation is certainly not a word on many music fans’ lips. Yet music royalty ABS is making a comeback, two and a half decades after its rise to fame and subsequent fall.

KBRA anticipates that music royalty issuance will top US$3bn in 2023, an increase on the US$2.6bn recorded in 2022 and a drastic uplift on the US$304m figure seen the previous year. Recent Structured Finance Association (SFA) research attributes much of the asset class’s reemergence to a turnaround in the fortunes of the music industry itself.

US music industry revenues reached a record high of US$15.9bn in 2022, compared with US$7bn in 2015. It was the seventh straight year of growth and the second successive year in which the figure outstripped the previously long-standing record witnessed in 1999.

Elen Callahan, head of research at the SFA, says that while music royalty ABS is a niche area of the securitisation market, it is one of the most exciting. In large part, Callahan explains, this is due to the connections people have with music. Names like Leonard Cohen or Justin Timberlake resonate with people and ignite all sorts of memories and emotions, she says.

The concept of capturing this emotional attachment as collateral in the financial markets was dreamed up by one of the music industry’s all-time great innovators, David Bowie. “Bowie really understood where music exists and how to capture that,” says Callahan. “He famously said: ‘Music itself is going to become like running water or electricity.’ He was clearly ahead of his time in this respect.”

She adds: “The premise of the Bowie bonds was that he would sell a 10-year block of royalties to investors for around the amount he would expect to earn in 10 years. That tool was replicated almost immediately by The Isley Brothers and then others followed suit.”

Ch-ch-ch-ch-changes
However, as the concept of securitising royalties began to gain popularity among music stars, broadband started replacing dial-up internet globally. File-sharing platforms emerged and the impact on the recorded music industry was drastic. According to figures by the International Federation of the Phonographic Industry, global recorded music revenues fell from US$39bn in 1999 to US$15bn in 2013.

“As soon as there was development in CDs, and we could rip them and burn them or share them online with our friends, royalties were challenged,” says Jessica Steele, research associate at the SFA. “The industry estimates that it lost US$300m in sales due to piracy. At the same time, we started seeing challenges in courts and infringement lawsuits over sampling - another new development. The investment opportunity in artists’ catalogues, which had been going on a nice uphill trajectory, became less appealing.”

One of the highest profile victims of this turbulent period in music history was major label EMI, home to The Beatles, Elton John, David Bowie, Pink Floyd and countless other stars. Acquired by private equity firm Terra Firma in 2007, EMI collapsed under a mountain of debt and was taken over by its creditors Citi in 2011. It has since been relaunched by Universal as a standalone flagship label.

Fortunately, since 2013, global music revenues have recovered significantly. The key driver behind this turnaround is digital consumption - once the industry’s greatest source of trepidation. The SFA research highlights figures by the Recording Industry Association of America, which show that subscription-based streaming platforms generated US$13.1bn for the US music industry in 2022, equivalent to 84% of revenues.

“The way that the streaming business model works, with a low dollar subscription threshold, means it is a very interesting product,” says Callahan. “People are unlikely to cancel their subscriptions unless they absolutely have to because of how important music is to our lives.”

Now with a steadily growing source of revenues, the worst of the music industry’s woes appear to be over. This rediscovered stability means the capital markets are once again open to it.

By happy accident, this has coincided with a number of stars - who first emerged from the late 1960s through to the 1970s - approaching retirement age, as Steele highlights. Securitisation has proven to offer a popular pension plan option.

 Yields of gold
“Sting sold his catalogue to the label he'd been with for 30 years, saying he trusted them to curate his collection appropriately and with respect for the art,” says Steele. “Neil Young said it was about the money - that he sold his catalogue because he wants to get up every morning and only do the things he wants to do.”

Callahan suggests that what makes the recent rise in music royalty ABS more intriguing than it was initially in the 1990s is that the catalogues are now far larger and more diverse. Gone are the days when investors bought catalogues by one artist.

When music publisher Concord priced US$1.8bn of notes in December, it secured them against a portfolio of more than one million songs. KKR’s Hi-Fi transaction in February 2022 and the Hipgnosis Music Assets deal six months later were smaller, but still spanned a vast spectrum of artists and genres.

“The fact that we've been able to go across artists as well as genres and eras has really helped the risk profile of these transactions,” says Callahan. “It's all about diversity and it makes for more resilient portfolios. The demand for this type of ABS has grown, primarily because of the supply side - the artists' willingness to sell their rights.”

Securitisation and music certainly appear to be well suited to each other, particularly now the music industry has found a way to monetise the digital disruption that once appeared an existential threat. Yet other parts of the capital markets are also emerging as financing opportunities.

 “There are other types of financing that are potential revenue streams for artists; for example, NFTs,” says Steele. “If it scales up and people want this new version of ownership, as opposed to buying a vinyl; if they want to own a slice of a song, for example, then they can buy it.  Whenever there's this cash stream, there's potential for people to look to the capital markets. And there are more directions in which this could go.”

Callahan agrees, though ultimately she argues the steady-as-she-goes nature of securitisation is ideally suited to the risk profile of music-related intellectual property assets. “For the broader capital markets, it has to be scalable,” she says. “That's the key. But for the private debt market, it doesn't. As long as there's a regular stream of cashflows, then I don't see why it couldn't be sold off, which is the premise of securitisation.”

She concludes: “It's really a perfect marriage of fintech. You build on the tech developments of the music industry over recent years and then you combine it with the tool of securitisation.”

Kenny Wastell

Structured Finance

SCI Start the Week - 24 July

A review of SCI's latest content

Last week's news and analysis
Capital loss
Fed's scheduled CET1 increase to shred US bank excess capital
Consumer goals
EIF, historic champion of SMEs, embraces consumer ABS
CMBS opportunities
Despite sector malaise pockets of gold are to be found
Wider still and wider
GSE CRT spreads blow out in 2023
Job swaps weekly: Oppenheimer's blockbuster appointment
People moves and key promotions in securitisation

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

Recent premium research to download
Emerging UK RMBS – July 2023
The return of 100% mortgages and the rise of later-life lenders herald an evolving UK RMBS landscape. This Premium Content article investigates how mortgage borrowers’ changing needs are being addressed.

Office CMBS – July 2023
The office CMBS market is grappling with headwinds brought about by declining occupancy rates and rising costs of borrowing. However, as this Premium Content article finds, the European CRE market may not be as badly affected as its US counterpart.

CRT counterparty risk – May 2023
Recent banking instability is unlikely to result in contractual changes in synthetic securitisations, but structural divergences are emerging. This Premium Content article investigates further.

‘Socialwashing’ concerns – May 2023
Concerns around ‘socialwashing’ remain, despite recent advances in defining social securitisations. This Premium Content article investigates why the ‘social’ side of ESG securitisation is more complex than its ‘green’ cousin.

European solar ABS – May 2023
Continental solar ABS is primed for growth as governments and consumers seek energy independence. This Premium Content article investigates.

All of SCI’s premium content articles can be found here.

SCI In Conversation podcast
In the latest episode, Terry Lanson, an md at Seer Capital and an established luminary in the regulatory capital relief trade market, discusses the prospects for further growth and development of the SRT market in the US. Lanson believes that, in the wake of the failure of several regional names and renewed capital pressures on US banks in general, there are grounds for optimism.
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 Australian/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 Tauseef Asri 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
Esoteric ABS Seminar
12 September 2023

Women In Risk Sharing
18 October 2023

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

Capital Relief Trades

Less punitive

Halving of p-factor sparks SRT optimism

The European Council’s finalisation of the Basel 3 reforms last month has sparked renewed optimism across the European capital relief trades market, with news of an agreement to halve the punitive p-factor (SCI 28 June). The impending need to address the adverse effects of the output floor had been at the core of the regulatory debate for synthetic securitisations (SCI 22 November 2022).

“Everything appears to be going in the right direction,” confirms one European SRT investor. “The p-factor was indisputably the biggest factor, as it could have killed a large segment of the market.”

He continues: “Furthermore, what is a really positive sign is that the regulators understood, listened and changed things. Such a decision demonstrates the growing importance of the SRT market.”

However, as such a reduction in the risk weight floor only applies to IRB banks, will less sophisticated or standardised banks be ultimately disadvantaged? The investor, for one, does not expect significant repercussions.

“Standardised banks still have the opportunity to do transactions under the STS methodology, which limits the thickness of placed tranches. An important parameter to remember is that standardised tranches have more significant capital requirements and banks should be more motivated to transfer risk than IRB banks,” he suggests.

He continues: “Additionally, the presence of standardised banks in the SRT market is still relatively inconsequential. However, for the survival and growth of the market, we needed to sort out the output floor.”

In this context and looking towards the future development of the SRT market, the investor underlines the importance of the p-factor revision. He notes: “It is not common to see a regulator backtrack from a detrimental – albeit probably unintentional – measure. It demonstrates a clear will to protect this market.”

Indeed, the investor has already identified potential beneficiaries from the move. “Under Basel 4, institutions with medium to very low risk-weights - such as Scandinavian or large mortgage banks - will be penalised on the asset side but no longer on securitisation. So, we should expect a lot of issuance in this segment.”

Vincent Nadeau

Capital Relief Trades

Risk transfer round-up - 27 July

The week's CRT developments and deal news

Pipeline update
The capital relief trades market is currently seeing a lull in activity ahead of the traditional fourth-quarter spike in issuance, as banks seek to close transactions before year-end. Indeed, a significant pick-up in CRT trades is anticipated straight out of the blocks in September.

“We are expecting a lot of significant risk transfer deals to hit the market in the coming months – around 20 in September, for example. Of course, some will probably be delayed until October, but generally we are expecting a heavy pipeline,” confirms one European SRT investor.

With the summer break in full swing, next month should see little – if any – issuance. “I’m not expecting anyone to close a deal in August,” the investor reports. “Rather, it is a time for everyone to work on due diligence, analysis and so on.”

He adds: “We might see one or two bilateral trades, but no more than that. The challenge in August is always for a bank to have its entire risk team available, along with three or four investors, when everyone is working at the same pace. That is why people prefer to close deals in September.”

CRT new issue pipeline

SCI SRTx indexes

For more information on the Significant Risk Transfer Index (SRTx), click here.

Capital Relief Trades

Mortgage penalty

Higher risk weighting for high LTV loans boosts SRT

As had been strongly rumoured, new capital rules unveiled by the Federal Reserve today (July 27) ascribe heavier risk weightings to higher LTV mortgages.

Currently first lien mortgages are subject to a 50% risk weighting, but the proposed regulations seek to impose weightings of between 40% and 90% to larger banks. Loans with high LTVs will receive the highest risk weightings.

The adjustments, which are now subject to a comment period, go beyond the stipulations of Basel 3 by about 20%.

The changes enhance the likelihood that US lenders will turn to the SRT market for capital relief, agree sources. While there have been few reg cap deals from US banks, those that have brought deals have tended to favour mortgages assets; these changes make the suitability of home loans for the mechanism even more apparent.

Western Alliance Bank, for example, brought several SRT deals in 2021 and 2022, and the bulk of them securitized home loans. Pacific Western also did a mortgage SRT in September 2022.

Though the US bank SRT market has been slow to get off the ground, this is set to change, say market-watchers. “These changes will make the attractiveness of the CRT market more striking to large and small banks. I can say that the excitement levels are now very high,” says a source familiar with the market.

To date, regulatory opposition to the market has forestalled greater issuance, but sources add that market participants are now unwilling to tolerate continued obfuscation. “I know trade groups that are willing to go to Capitol Hill on this one,” says one.

Lobby groups have responded with dismay to the innovations. It is feared that heavier capital charges will compel lenders to pull out of the provision of credit to borrowers who cannot submit higher downpayments.

 “Without significant revisions, this proposal will increase borrowing costs and reduce credit availability for the very consumers and borrowers this administration ostensibly seeks to assist,” commented Bob Broeksmit, president of the Mortgage Bankers Association.

Overall, the new capital rules, set to become effective from October 2023, will raise bank capital requirements by about 19%, say analysts.

The most onerous requirements also kick in at a lower threshold than hitherto, so banks with assets of more than US$100bn are now subject rather than only banks with assets over US$250bn.

The minimum requirement is common equity tier one (CET1) capital ratio of 4.5% - which is the same for every bank - plus a stress capital buffer derived from stress tests of at least 2.5% plus a G-SIB surcharge of at least 1%, if required.

Thus, for example, a bank like PNC or KeyCorp, neither of which is deemed a G-SIB, has a capital requirement of 7%. But UBS Americas, while not a G-SIB, has a CET1 ratio of 4.5% and a whopping 9.1% stress capital buffer to give a total requirement of 13.6%. 

Among the domestic G-SIBs, Goldman Sachs, with a stress capital buffer of 5.5% and a G-SIB surcharge of 3% for an overall capital requirement of 13%, receives the most punitive treatment. Morgan Stanley, with 12.9%, is not far behind.

Simon Boughey

Capital Relief Trades

Get in, Granville

BNS brings much heralded SRT deal, latest Canadian to set sail

Bank of Nova Scotia (BNS) has sold its first SRT trade, a securitization of investment grade loans, in a transaction dubbed Granville USD.

The trade, which was arranged by BNP Paribas, has been rumoured for several weeks, and is the latest in a series of regulatory capital relief trades by Canadian banks.

Bank of Montreal has had a presence in this market for years, but in 2023 Toronto Dominion Bank (TD), Canadian Imperial Bank of Commerce (CIBC) and now BNS have joined the party as regulators have tightened the screws on domestic lenders.

Granville securitized a $9bn bloc of investment grade loans, according to sources. As the lender is subject to standardized risk weighting, it makes sense to seek capital relief on loans which carry the same risk weighting as assets which have a higher chance of default.

The face value of the amount sold is $720m.

There were three tranches sold: 0%-6%, 0%-8% and 6%-8%, adds sources.

The 0%-6% tranche carries a yield of 9.75%, the 0%-8% tranche a yield of 9.125% and the 6%-8% tranche a yield of 345bp, they say.

Several investors were involved, suggest sources, one of which is said to have been an insurer.

Granville priced about ten days ago but settled this week.

Bank of Nova Scotia was unavailable for comment and BNP Paribas declined to comment.

Simon Boughey

Structured Finance

'Transformational' merger agreed

Market updates and sector developments

Rithm Capital is set to acquire Sculptor Capital Management in a transaction valued at approximately US$639m, which includes US$11.15 per Class A share of Sculptor. This transaction will leverage Sculptor’s US$34bn of AUM with Rithm’s US$7bn of permanent equity capital and US$30bn-plus balance sheet to create what the firm describes as a “world-class” asset management business.

Sculptor’s investment and leadership teams will continue in their roles and certain members of Sculptor leadership have agreed to vote shares held by them, representing an aggregate of approximately 26% of the outstanding Sculptor voting shares, in favour of the transaction. Upon completion of the transaction, Sculptor will operate as a subsidiary of Rithm and will continue to be led by Jimmy Levin, as cio and executive managing partner, reporting to Michael Nierenberg, ceo, president and chair of Rithm.

In other news…

PGIM CLO ETF debuts
PGIM has launched the PGIM AAA CLO ETF (PAAA), offering retail investors direct access to the US$1.2trn CLO market, historically accessible only to institutional investors. PAAA is sub-advised by PGIM Fixed Income, which has US$101bn in securitised credit assets under management, including US$55bn in CLO tranches.

While the ETF represents a new retail offering for the firm, PGIM Fixed Income has been managing sleeves of high-grade CLOs within its investment strategies for more than 15 years, with a team of 27 investment professionals dedicated to the securitised credit space. The ETF is managed by PGIM securitised products co-heads Edwin Wilches and Gabriel Rivera, alongside CLO portfolio manager Connor Byrnes.

With a net expense ratio of 0.19%, PAAA seeks to maximise total return through a combination of current income and capital appreciation, investing primarily in US CLOs rated triple-A or equivalent.

Structured Finance

Job swaps weekly: Angelo Gordon beefs up in structured credit

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Angelo Gordon poach a new head for its commercial real estate debt division from Tilden Park Capital Management, alongside a raft of senior promotions in its structured credit team. Elsewhere, law firm Blank Rome has launched a new Dallas office with two senior hires from Alston & Bird partners, while ARC Ratings has named a successor to outgoing chairperson Olivier Beroud. 

Angelo Gordon has appointed Tilden Park’s David Busker as head of commercial real estate debt and made four additional promotions within its structured finance team. The appointments come shortly after the firm held a US$1bn final close for AG Asset Based Credit Fund, surpassing its US$800m target.

Busker leaves Tilden Park after seven years with the business and will work out of Angelo Gordon’s New York office, focusing primarily on the CMBS space. He previously spent nine years at Sorin Capital Management.

The group has also promoted managing directors Marc Lessner and Xavier Dailly, who joined Angelo Gordon in 2012 and 2013 respectively, to co-deputy portfolio managers for its open-ended structured credit fund. Managing director Aaron Ong joined from JPMorgan Chase in 2006 and has been promoted to head of private asset-based credit. Lessner, Dailly and Ong are based in New York.

Angelo Gordon has also elevated another managing director, Sunil Kothari, to head of European ABS. Kothari joined in 2019 and is based in the firm’s London office.

Elsewhere, Blank Rome has hired a team of legal professionals to open its new office in Dallas, representing its second office in Texas and 15th across the US. The team includes two former Alston & Bird partners and structured finance veterans in Mark Harris and Michael Thimmig, who have both been appointed as partner. 

Harris focuses on residential mortgages, consumer receivables and timeshare receivables, as well as auto loans, leases and subscriptions. Thimmig has expertise across structured finance, fintech, mortgage banking and secured lending transactions. His practice centres on structured warehouse credit facilities secured by consumer loans, commercial loans, and merchant cash advances.

Andrew Cunningham has been appointed as the new chair for ARC Ratings, following the completion of outgoing chairperson Olivier Beroud’s five-year term. Cunningham will take up the role after joining the structured finance ratings specialist as an independent non-executive director last year. Prior to this, he served as a member of the executive committee for The Balfour Project. He has experience across the Middle East, Islamic finance and bank credit analysis. 

Citigroup managing director Roger Ashworth has joined Goldman Sachs as managing director on the securitised products research team. Ashworth will work out of Goldman’s New York office and leaves Citi after 10 years with the business.

Moroccan state-owned banking group Caisse de Dépôt et de Gestion (CDG) has appointed Houda Chafil as director of resources and financing, based in Casablanca. Chafil has been promoted from her role as general director in the group’s securitisation-focused subsidiary Maghreb Titrisation and has spent 15 years with the wider CDG group.

McGuireWoods has hired Kirkland & Ellis’s Nicholas Dancey as partner in its global real estate team, working out of its Atlanta office. Dancey leaves his position as partner in Kirkland & Ellis’s Chicago office after a year and a half with the firm. He previously spent six years as general counsel at Quadrant Real Estate Advisors.

London-based real estate investment manager Topland Group has appointed Credit Suisse’s James Conolly to its structured finance team. Connolly leaves his role as director in Credit Suisse’s  real estate finance team after one year with the bank. He was previously relationship director in the real estate finance team at Secure Trust Bank.

Spanish sustainable infrastructure solutions group Acciona has promoted Jose Arteaga to head of structured finance. After more than 15-years at the firm, Arteaga will relocate to its office in Madrid, having served as Acciona Energy’s financial economic director in Mexico since 2017.

Project finance specialist Fulya Uysal has joined Akbank’s investment banking team as a new project and structured finance manager. Uysal joins from competing Turkish bank İşbank where she had worked as a project finance specialist since 2017.

National Equity Fund (NEF) has bolstered its lending team with the hire of new structured finance vps Mark Migliacci and Brandon McCall from JPMorgan Chase and Enterprise Community Investment respectively. 

Migliacci joins the firm in its Boston office to focus on the preservation of affordable and middle-income housing within its debt and equity originations business. He leaves JPMorgan Chase’s community development banking team after three and a half years with the business. 

McCall joins the NEF structured finance team in Dallas after five and a half years with Enterprise Community Investment, where he most recently served as a senior underwriter.

And finally, DLA Piper has hired Allen & Overy’s Pietro Milanesi as an associate in its structured finance and debt capital markets team. Milanesi is based in Milan. He leaves his position as associate at Allen & Overy after four years with the firm.

Structured Finance

PRA launches SecReg consultation

Market updates and sector developments

The UK PRA has launched a public consultation on proposed changes to the retained EU Securitisation Regulation and the accompanying technical standards on risk retention and disclosure. Rather than a complete overhaul, the authority is seeking to introduce targeted adjustments to the existing EU securitisation framework by 2Q24.

The key changes include a more principles-based approach to due diligence obligations on PRA-authorised institutional investors in relation to originator disclosures, which is designed to make these requirements more proportionate and facilitate international competitiveness. Similarly, clarifying that in certain circumstances only the managing party and not the delegating party would be subject to due diligence requirements could make them more proportionate and facilitate international competitiveness.

Meanwhile, by making risk retention requirements in non-performing exposure (NPE) securitisations more proportionate, the PRA is seeking to facilitate the use of NPE ABS by authorised persons to reduce their credit risk. Such a move aims to promote their safety and soundness, as well as facilitate competitiveness and growth in the medium to long term.

Other smaller changes to risk retention requirements are intended to make these requirements clearer, including by further specifying their content, as well as make them more proportionate.

Finally, a new statement of policy regarding resecuritisations would increase transparency by indicating that the PRA would usually envisage using section 138BA of FSMA to grant permissions for resecuritisations only in circumstances broadly similar to those in which it could currently grant permissions for resecuritisations under the Securitisation Regulation.

Additionally, the consultation addresses the distinction between public and private securitisations and the associated transparency requirements, in order to seek views and evidence from respondents. The PRA says it may consult on proposals in this area in a future consultation paper.

Feedback is invited on the proposals set out in the current consultation by 30 October.