Contents

Capital Relief Trades

Basel 4 series: SRT game changer - video

Market participants share their views on the extent to which Basel 4 is a game changer for the SRT space

In the first instalment of SCI's Basel 4 video series, Alantra md Holger Beyer provides a brief outline of what's new in Basel 4 and SCI's Kenny Wastell asks market participants whether the new regulations will be a game changer for the SRT market.

Capital Relief Trades

Glass half full?

PRA publishes discussion paper on capital requirements for securitisation transactions

Following consultations by the PRA and FCA, which set out proposed non-prudential rules for the UK securitisation market as part of the broader post–Brexit regulatory framework, the PRA has recently published a discussion paper on certain securitisation prudential regulation issues, all of which are relevant to, and potentially impactful for, synthetic securitisations.

One of the measures discussed in the paper relates to mitigating the impact of the CRR3.1 output floor on securitisation. Commenting on this issue, Jo Goulbourne, consultant at Allen & Overy, says: “Although the PRA’s approach is not certain at this point, it’s good that they seem minded to help on this issue – which is existential for corporate and SME deals – and to do that by way of a permanent reduction, for all purposes, in the SEC - SA p factor, rather than a transitional reduction that is specific to the output floor calculation, as envisaged in the EU.”

She continues: “Unfortunately, it looks as though the quantum of the reduction may be somewhat more modest in the UK than the EU, and potentially transaction feature-specific (for example, distinguishing between retail and non-retail transactions). There is also a timing issue in the PRA’s proposal to consult on this topic in H2 2024, given that deals can’t be structured now if they risk becoming uneconomic from mid 2025.”

In terms of the bigger picture around securitisation prudential regulation, Goulbourne notes: “It’s helpful that the PRA seem persuaded that further review of the framework is required. Unlike the EU, though, they are not proposing to undertake their own review, but looking to Basel for that. We’ll have to see what comes out of the current FSB-level review of the securitisation prudential and risk retention framework, where initial feedback is expected early next year.”

The discussion paper addresses another, unhelpful, feature of the UK securitisation prudential framework: the absence of an STS framework for synthetic securitisations. On this topic Goulbourne notes: “Notionally, the PRA are seeking industry input on the merits of a framework similar to the EU balance sheet STS regime, but I think we need to manage our expectations around that. The paper articulates the idea in negative terms and it’s reasonably clear that the PRA are looking for the answer ‘no - we’re not having one’, unless - perhaps - the industry can produce overwhelming data in terms of the impact on UK competitiveness.” 

The paper also refers (without providing further detail) to the prospect of additional regulation on lifetime “commensurateness” in SRT applications - raising the prospect, in Goulbourne’s view, of UK measures akin to (though not necessarily the same as) the controversial tests proposed in the EBA’s 2021 SRT Report. The paper also, more positively, envisages PRA liaison with the industry around the use of *unfunded* credit protection to achieve the requisite risk transfer in SRT deals (historically a UK-specific challenge). 

Finally, the PRA raise the prospect of refinements to the CRR securitisation risk weighting hierarchy, reversing the EU’s prioritisation - in most circumstances - of the SEC-SA over the SEC-ERBA (a deviation from Basel which is understood to be generally industry friendly - though potentially more necessary in certain EU jurisdictions than in the UK due to the impact of sovereign floors on credit ratings). 

Analysing the PRA‘s overall mood and vision going forward, Goulbourne notes that “It does seem as though the PRA‘s secondary competitiveness objective is making a difference, at the margins, to their approach. However, that objective is explicitly subject to compliance with relevant international standards. They are pruning and amending requirements where they are not constrained and don’t see prudential value - for example, scrapping the NPL backstop & making changes to matching adjustments rules for insurers - but we are far from seeing an ‘Singapore-On-Thames’ approach to financial regulation at this point. It’s probably fair to characterise the UK’s proposed implementation of CRR 3.1, overall, for example, as a middle road between the EU’s more industry-friendly implementation approach (with significant - albeit often technically transitional - divergence) and the US’s problematic gold plating. 

Vincent Nadeau

ABS

Securitisation due in H1 for international student loan provider

Goldman, Deutsche and Värde backed MPOWER's latest debt funding round

MPOWER Financing, a provider of loans for international university students, is due to price its first securitisation in the first half of 2024 after closing its latest debt funding round. The business has raised further commitments from Goldman Sachs, Deutsche Bank and Värde Partners to bring its total deployable capital to more than US$300m.

“There are three forces at play in the latest round of funding,” says MPOWER ceo Manu Smadja. “There’s a recommitment from Goldman Sachs, a growth in investment from Deutsche Bank and a newcomer in Värde Partners. Värde is acting as a master mezzanine provider in both the Goldman warehouse and the Deutsche Bank warehouse, which are almost at parity now in terms of size.”

MPOWER secured a US$150m revolving asset-backed warehouse facility with Goldman Sachs in May (SCI 23 May). At the time, Smadja told SCI that MPOWER was pursuing securitisation as part of the build-out of its “capital markets toolkit”. To support this, it hired Rob Partlow as CFO from fintech company GreenSky and Christopher Zaki from Above Lending as head of capital markets in 2022.

After the closing of its latest debt funding round, Smadja says a securitisation is likely to materialise in the first half of next year. “We have reached the appropriate scale today,” he says. “When you start a programme of securitisations, investors want to see subsequent deals at least once a year, if not once a quarter. By the time we start [issuing] next year, we will be at the level of production where we can reliably support that.”

Smadja explains that the company is seeing favourable conditions for securitisation issuance. “There have been some positive signs in the market, with a few transactions by fintechs in the student lending space recently,” he says. “It’s not 2021 anymore. We’re in a new environment where the mantra of the day is: ‘Rates are going to be higher for longer.’ But terms are still very acceptable, things are closing and business is getting done.”

MPOWER positions itself as a “mission-driven fintech firm” that is looking to “democratise access to higher education”. It has a particular focus on post-graduate students from developing economies including India, Mexico, Brazil, west Africa and southeast Asia, who will typically be in gainful employment and looking to study STEM subjects in the US and Canada. 

The latest funding round will finance what the company describes as a “rapidly growing portfolio of loans” as it responds to the record levels of international student enrolments in both the US and Canada last year. 

Only around one quarter of the US’s domestic student loan market is accounted for by private loans today, Smadja says, reaching a total of less than US$20bn annually. The international private student loan market has outgrown that figure, yet has far fewer lenders than the domestic market. This, he says, presents MPOWER with plenty of runway for growth in North America in the years ahead.

Kenny Wastell

Capital Relief Trades

Canadians coming

Scotia back in the CRT market

Scotia Bank is back in the SRT market, only three months after it sold its inaugural deal in this sector, say well-placed sources.

It is selling a synthetic securitization of a US$4bn pool of loans, some 20%-25% of which are non-investment grade, add sources.

It is selling a first loss position of 0%-7.5% and the price range is between 9.25% and 9.50%, they say.

The arranger of the deal is said to be Natixis.

The deal is thought to be going to a handful of buyers, anchored by a lead investor.

Simon Boughey

Capital Relief Trades

Motor Securities 2023-1 prices

Santander completes UK capital relief trade

Santander has executed Motor Securities 2023-1, a synthetic securitisation of UK auto loans.

Similarly to last year, the transactions consists of two placed tranches; a £26.7m class D tranche (with an expected AAA rating from ARC and KBRA) and a £41.2m unrated class E tranche. The D tranche priced at SONIA plus 400bp, while the E tranche landed at SONIA plus 1200bp. Both tranche have a WAL of 2.82 and 2.96 years, respectively.

Comparatively, the previous SRT in the programme saw tranches C and D price at SONIA plus 300bp and SONIA plus 900bp, respectively.

Vincent Nadeau

Capital Relief Trades

Global Risk Transfer Report: Chapter two

In the second of six chapters surveying the synthetic securitisation market, SCI explores recent regulatory developments in SRT

IACPM’s latest risk-sharing survey notes that 2022 highlighted not only a substantial growth in SRT product utilisation by banks, with €200bn in new issuance, but also some structural changes in the risk-sharing activity of banks. Nevertheless, a number of regulatory challenges remain outstanding.

SCI’s Global Risk Transfer Report examines how the risk transfer community is addressing these issues – through regulation or structural enhancements – and the fallout from the turmoil in the US bank sector in March. It also explores the new frontiers that are emerging across jurisdictions and asset classes.

Chapter 2: Regulatory developments
At the end of 2022, several regulatory challenges remained that threatened to undermine the future viability of synthetic securitisations. These challenges included homogeneity criteria and the determination of the exposure value of synthetic excess spread (SES) in STS synthetics, as well as the looming introduction of the Basel 4 output floor in Europe. The EBA and the European Commission have this year sought to address these issues, reflecting concerns voiced by market participants in what many believe to be a recognition by European policymakers of the importance of SRT to the broader economy.

For example, the initial parameters proposed by European regulators for the SSFA risk weighting and output floor would have made nearly all - but certainly non-STC, non-mortgage - SRT securitisations uneconomic. But lawmakers appear to have listened to industry concerns and have provided a solution: changing the formula used to calculate tranche risk weights for the purpose of the output floor, thereby removing the negative impact and aligning the treatment of securitisation with other debt instruments.

“One very dark cloud has been lifted from the SRT market and that is the treatment of securitisation under Basel 4 in the EU, which was a significant concern for the industry,” confirms Olivier Renault, md and head of risk sharing strategy at Pemberton Asset Managers. “There's been intense advocacy to make sure that the regulators understand that the way the EU implementation of Basel 4 was drafted would have potentially led to most transactions being completely inefficient. The issue was the capital charge on the retained senior tranche, which under the Basel 4 output floor was multiple times higher than the current capital charge, so capital relief would have been mostly or totally eliminated.”

He adds: “Now that this cloud has been lifted, European banks can start issuing with confidence, given that they have a stable regulatory framework and that the efficiency of the transaction is going to persist for the foreseeable future. That is going to drive a lot of supply, so we expect the story will be one of continued growth.”

P-factor proposal
Under the changes, regulators are proposing to halve the p-factor, meaning that risk weightings applied to the more senior segments of the capital structure do not ascend as rapidly. The p-factor is the model used for risk weighting in securitisations, dealing specifically with the exponential decay function. 

“Unsurprisingly, we are concerned that the debatable but reasonable concept of capital non-neutrality has metastasized into rules that make risk transfer a non-starter. If SEC-IRB capital is 10%-15% higher than IRB capital, the market can manage. When it is 100% higher, the benefits of SRT securitisations become difficult to believe. Certainly the decision to reduce p-parameters to as low as .25 under STC securitisations is helpful,” observes Matthew Moniot, md and co-head of credit risk sharing at Man GPM.

The p-factor solution is a transitional measure, applicable only until 2030. European policymakers have mandated the EBA and the European Commission to review the securitisation capital framework more broadly and produce a report by the end of 2027. In the longer term, however, a fundamental rewrite of the securitisation capital framework may be necessary - potentially requiring the global rules to be rewritten, not just the EU rules.

“Halving the p-factor is a really good fix, [although] there needs to be a more permanent solution at some point. The outstanding question is whether it is creating a less even playing field between the standardised banks and IRB banks,” suggests Renault.

The p-factor has only been halved for IRB banks for the calculation of the output floor, not for standardised banks. Consequently, the solution leaves SA banks at a competitive disadvantage.

Jack Thornber, broker, structured and bespoke solutions at The Texel Group, notes: “While the halving of the p-factor is undoubtedly a welcome development for IRB banks, mitigating some of the damage that would otherwise have resulted from the introduction of the output floor, it does nothing to assist standardised banks or to close the gap between standardised banks and their IRB counterparts.”

Robert Bradbury, md and head of structured credit execution at Alvarez & Marsal, agrees: “The direction of regulatory travel in the last five years has been for standardised and IRB banks to come closer together. This pulls them apart again as we head into Basel 4: so smaller banks have definitively less efficient access to SRT than IRB banks. This is no different than it has been previously, but remains an area that could potentially be improved – the real economy does not benefit from a two-speed SRT market.”

Indeed, incentivising CRT for smaller banks would arguably feed the benefits through to the real economy faster. There are several ways this inequality could be addressed, Bradbury suggests.

“One action to support standardised banks could be some kind of regulatory support or incentive for green or ESG SRT. That could look like changes to risk weight floors or to the p-factor,” he says.

He adds: “It could be just lightening the reporting thresholds. You could have a lighter version of STS, so that it would be easier to get STS for green assets. That would be relatively straightforward and would incentivise people to securitise green assets - and even potentially encourage investment by smaller banks in more ESG assets in the first place, due to the improvement in capital recycling efficiency.”

Homogeneity criteria and SES
This year, the EBA also published final draft RTS on homogeneity criteria and synthetic excess spread (SES) for STS synthetics in February and April respectively, although at the time of writing the rules have yet to be formally adopted by the European Commission. While the number of transactions with SES is relatively small, the new rules are helpful for portfolios with higher incomes and higher losses.

For example, the yield on a consumer finance portfolio might be 10%, but there might be a 2% loss. Unless SES is available, that 2% loss makes the hedging of a junior tranche very difficult.

“For a four-year transaction, if your expected loss is 2% per annum, investors will expect the 0%-8% tranche to be fully eroded by losses, even in the base case scenario. Attaching the hedge above 8% would not bring any capital relief for the bank, but attaching below requires paying investors a very high spread that would compensate for these expected losses,” Renault explains.

He continues: “SES bridges this gap by letting the bank retain the annual expected loss (2% per annum in this example) and investors only cover risk above the expected loss. It is less risky and therefore investors should be willing to accept lower spreads.”

While SES can be helpful in certain circumstances, it can also effectively be replaced by retained first loss tranches. “For A-IRB bank portfolios, RWA goes up, driving compression to foundation and standardised approaches. This is especially true in mortgages. So, the bigger question is what will Sec Reg models do to retained tranche risk weightings and where is the inflection point? That’s more pertinent to the SRT market than there being a big change to the portfolio RWAs to begin with,” observes Moniot.

Jon Imundo, md and co-head of credit risk sharing at Man GPM, comments: “I think we’ll see more mezzanine issuance and higher attachment points for retained risk.”

Meanwhile, a desire for greater homogeneity in STS cash transactions geared towards inexpensive funding is understandable. But Moniot indicates that the benefits of greater homogeneity are less clear for synthetic equity and mezzanine deals.

“Multi-class transactions, for example, improve portfolio diversification. Additionally, some asset classes, such as CRE, are otherwise not likely to be granular enough to support stand-alone issuance. Regardless, these transactions tend to be negotiated between the buyer and seller of protection,” he observes.

ESMA templates
One thorny regulatory issue yet to be resolved, however, is the European Commission’s revision of securitisation disclosures relating to the reporting requirements under Article 7 of the Securitisation Regulation. An overhaul of the ESMA templates to provide clarity on which criteria issuers need to meet and which processes they need to follow would make entering the market more straightforward, for example.

“Until late last year, if you had a non-EU/UK issuer of a securitisation, the market interpretation was that you didn't have to fulfil the full extent of the Article 7 disclosure requirements. The effect of that revision for Canadian issuers and US issuers, who have investors deemed to be EU investors, is there is a requirement to have disclosure on the underlying reference portfolios and the levels of ESMA templates - which isn't necessarily easy to achieve,” notes Edmund Parker, partner and global practice head of derivatives and structured products at Mayer Brown.

The ESMA templates are widely held to be onerous. They are also not specific to SRT transactions and were designed to protect less sophisticated investors than those in the SRT market. As such, although EU-based investors still have to request ESMA templates from issuers for regulatory reasons, the content is largely ignored.

The templates are not only irrelevant, they are frustrating, according to Renault. “In a large corporate pool, it's over 150 fields that need to be populated for each loan. It's hugely time consuming and onerous for information that most investors will just archive and not look at because they receive the precise information they need outside the templates.”

This has an important impact, he warns. “It creates an uneven playing field between European and non-European investors. For example, if a European investor wants to do a securitisation transaction with a US bank, they will have to ask the bank to give them the ESMA template. If the bank instead places it with a US investor, it doesn't need to supply them with this information.”

But recently – thanks to industry advocacy - there have been signs of progress, with the European Commission asking ESMA to reconsider the application of its templates and potentially make a distinction between public securitisations (where information should be standardised and available to everybody via these templates) and private securitisations (where a few very sophisticated investors are involved, who know exactly what they need). Market participants agree that for the latter, the scope of the templates should be reduced or, ideally, that no templates should be required at all.

“These discussions could take another year or so. But at the moment, EU-based investors are at a competitive disadvantage versus non-EU-based investors for all these types of securitisations,” Renault argues.

Parker suggests that the situation is bedding down though. “Even though we haven't had the new ESMA templates yet, the market - although not happy - seems to be getting more comfortable with providing ESMA level disclosure.”

UK questions
Away from the EU, the UK Financial Services Markets Bill and the Edinburgh reforms introduced in December 2022 highlighted securitisation as something that the UK government is seeking to encourage. More recently, PRA and FCA consultations published this summer proposed or agreed with what SRT market participants regard as sensible changes, which should facilitate securitisation in the UK and keep the rules aligned with the EU. Furthermore, the tone from the PRA continues to be broadly positive on SRT.

The PRA’s Basel 3.1 consultation in November 2022, for instance, specifically highlighted that the authority is aware of the problems posed by the output floor. At the time of writing, the PRA delayed by six months the implementation date of the final Basel 3.1 policies to 1 July 2025 and also delayed the publication of near-final policies on credit risk, the output floor and reporting and disclosure requirements to 2Q24, in order to support firms in their planning processes.

“It remains to be seen whether the UK PRA will follow suit with Europe and introduce similar measures to lessen the impact of the output floor,” says Alan Ball, director, structured and bespoke solutions at the Texel Group. “The PRA has historically had a tendency to ‘gold plate’ regulatory requirements around CRT transactions, such as when it previously required even IRB banks to secure external tranche ratings. Such an approach post-Brexit risks putting UK banks at a competitive disadvantage, arguably for little to no gain.”

Ball continues: “That said, the divergence from the European landscape may also provide an opportunity to set a best-in-class example of how to encourage and foster a diverse and thriving risk-sharing landscape for banks that ultimately benefits the real economy.”

In July, the UK Treasury published a draft of the statutory instrument intended to replace the EU Securitisation Regulation, described as ‘near final’. Upon examination, however, many market participants fear that, as currently drafted, the instrument could create difficulties for banks issuing CRTs.

A key concern is that the FCA may erroneously flag some private SRT deals as public deals, making such deals more complicated, more costly and ultimately less attractive. Although banks are expected to push back, if the proposal is implemented, many feel that it will represent an operational burden, though few feel that the measure will ultimately curtail further issuances.

“This is not something I follow closely, but if the UK wants to be competitive, UK regulators or lawmakers should implement an STS framework for the UK for synthetic securitisations. They will also need to fix the Basel 4 floor, as the EU just did,” Renault concludes. “They have given some positive noises that they're willing to listen to the industry and to come up with a potential solution, but they haven't put anything forward yet to my knowledge.”

Despite this uncertainty, two to three smaller UK banks are anticipated to start engaging in CRTs next year.

SCI’s Global Risk Transfer Report is sponsored by Arch MI, Man GBM, Mayer Brown and Texel. The report can be downloaded, for free, here.

Capital Relief Trades

A global market

Matthew Moniot, co-head of credit risk sharing at Man GPM, answers SCI's questions

Q: Could you tell us about your recent move to Man GPM?

A: We joined Man Group in 2022, from Elanus Capital, the firm I founded back in 2010. By 2020 two things were apparent. Firstly the SRT market had grown significantly and was starting to attract large, institutional managers and secondly, technology, an area of focus at Elanus, would be an increasingly critical driver of SRT portfolio management. As we looked for a platform with world class sales, marketing and technology teams and infrastructure, Man Group was an obvious choice for us.

Technology is Man Group’s DNA; it underpins every aspect of the business. Over a third of staff here are computer scientists or data engineers. We operate in a data intensive market, meaning that the integration of Man Group’s computer science and data science capabilities has allowed us to make substantial gains in our analysis and reporting capabilities. This coupled with leveraging the extraordinary salesforce here at Man and being part of a larger global credit platform, means we can analyse exposure and communicate with market participants on an industrial scale.

Q: How is the Man group seeking to extend its range in securitisation and the SRT market?

A: SRT is an incredibly quantitative, data-oriented, and analytic market. It can also be very inefficient. Transaction pricing is not always clear, which can create real opportunity.

Man Group applies much of its technology spend to portfolio and risk management. A significant amount of Man Group’s institutional knowledge can be applied to analysing and pricing credit risk in illiquid form. For instance having the ability to apply real time market pricing to our underwriting and risk analysis is, to us at least, exceedingly important and we think a real differentiator. It’s important to understand our assets not just notionally, but also adjusted for risk and dynamically through various scenarios. By leveraging Man’s quant capabilities, as a team we can quickly run stress tests under various market scenarios to understand and hedge our exposure in an efficient and systematic way.

Q: What, in your opinion, is the greater benefit of investing in SRT trades, versus comparable instruments and asset classes?

A: To start with an anecdote, I used to joke that, when we started the legacy manager, I would show up to various conferences and say: “I’m here to talk about structured credit” and half the attendees would get up and walk out of the room, “and European banks” and the other half would leave. Over the last decade and a half, perhaps in response to regulatory reform, investors have moved away from securitisation and toward direct lending, trading structuring risk for operational risk.

But those same regulatory reforms created SRT opportunities with very little operational and structuring risk. Banks now carry very high regulatory capital charges against their banking book assets. High capital charges create a disincentive to originate and retain these assets but banks cannot do that without losing the relationships and therefore the fee revenue that they need to drive returns. The obvious answer is to keep the asset but sell the risk, which banks can do quickly and easily through SRT. Meanwhile, since the vast majority of these assets are in fact high quality and predictable, investors can generate high quality risk adjusted returns by entering into these transactions – provided they are structured appropriately.

We think that through most parts of the cycle, these are risks that will outperform the rest of the credit markets and most of the alternative investment management space. Sector performance over the past 13 years, while somewhat opaque, largely supports this belief.

Q: What, in your opinion, has been the most significant market development for the European SRT market in recent years?

A: Three issues come to mind. Bank resolution and the treatment of note proceeds which were largely clarified in 2018 with the introduction of the Bank Resolution and Recovery Directive (BRRD). New entrants from secondary markets have begun to issue and we believe US banks are poised to join them at which point this market will be genuinely global. And finally, SRT as an asset class and as a form of credit risk capital was put under some level of stress in 2020 and performed extremely well with banks that issued SRT seeing material benefits in their second and third quarter earnings.

SRT proved itself once again in spring of this year as bank distress served to remind investors that banks can get into trouble and that bank equity and credit are subject to risks far beyond loan portfolios. While holders of AT1 securities saw substantial volatility and in some cases complete write-downs, SRT investments performed largely as if nothing at all was taking place.

We think that these stresses in the banking space should lead to a marked increase in interest from investors. Disruptive as the crisis was, we consider the resulting dynamics highly supportive of the demand for and structure of CRS transactions. 

Q: What trends and challenges do you anticipate to surge for the rest of Q4 and beyond?

A: Corporates have been in an interesting position for the past two years. During the coronavirus pandemic corporates increased issuance but also experienced very high nominal revenue growth which led to increased earnings. Now we are beginning to see the first signs that slower growth, particularly in Europe, and higher rates in the U.S. and U.K., will have the opposite impact with interest coverage ratios coming off cyclical highs.

We suspect earnings will remain fairly strong and defaults fairly low, outside of the furthest fringes of leveraged credit, through year end. However we also think an inflection will occur in 2024, as the impact of slower consumer demand and higher interest expense combines to drive defaults.

Although, given the defensive attributes of the referenced assets and the relatively conservative allocation of capital against these exposures, we expect performance to remain strong and market growth to increase. That noted, the environment will likely become more challenging as we get further into what has been a very long period of credit growth. Managers with experience through cycles, who have the ability to analyse and navigate various markets and to recruit the best underwriters, will become increasingly key to navigating the market’s risks and rewards.

Of course, market growth looks entirely certain as we look at issuers outside of core Europe entering the market for the first time. Canada, and more recently Poland, are a good examples of a rapidly establishing markets, and we are seeing signs that U.S. banks are finally ready to be serious issuers – which will change the market very significantly.

Vincent Nadeau

Structured Finance

Scope sees ratings drift reverse in Q3

Market updates and sector developments

Ratings drift in structured finance instruments improved in the third quarter of 2023 for the first time in more than a year, Scope Ratings has revealed. The metric measures the ratio between upgrades minus downgrades and the total number of monitored ratings over the past year.

While the agency oversaw just 12% of 294 instruments upgraded against 17% that were downgraded, the -5% ratings drift was an improvement on the -10% observed in the second quarter of the year. Scope says NPLs, auto and vehicle, and SME instruments were boosted by better-than-expected collateral performance, with the asset classes accounting for 31%, 28% and 28% of upgrades respectively. 

NPLs also accounted for the largest portion of downgrades at 59%, which the agency says is due to depressed sale prices. Unsurprisingly, CRE and CMBS instruments accounted for 24% of downgrades, which Scope attributes to refinancing risk and depressed values brought about by persistent inflation and rising interest rates.

The agency assigned new ratings to 123 instruments spanning 78 transactions in the year to September 2023. Around 46% of issue volume throughout that period was rated triple-A, with 4% rated at sub-investment grade.

Structured Finance

Job swaps weekly: ESG debt-swap pioneer transitions to UBS

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees a Credit Suisse veteran take on a senior ESG- and structured-credit role at UBS Group following the latter’s acquisition of the former. Elsewhere, Colliers has lured two ex-George Smith Partners (GSP) executives as vice presidents, while a senior Federal Housing Finance Agency (FHFA) exec has joined Guy Carpenter.

Credit Suisse veteran Ramzi Issa, widely credited as the pioneer of the ESG debt-swap market, is to take up a new role at UBS Group, according to multiple reports. The development comes five months after UBS completed the acquisition of its crisis-hit Swiss competitor. 

Issa joined Credit Suisse in 2007 and has most recently served as global head of credit investor products structuring at the bank. He will reportedly oversee global structured credit and sustainable credit products in his new role at UBS.

Meanwhile, Toronto-headquartered commercial real estate group Colliers has hired two former GSP executives as vps in its structured finance division, both working out of its Los Angeles office. The moves come shortly after the firm snapped up industry veterans Jonathan Lee and Shahin Yazdi from GSP as LA-based executive mds. 

Institutional Property Advisors’ (IPA) Tommy Adelson has joined the firm 10 months after joining IPA from GSP as a director. He spent two years at GSP following spells at Elkwood and CBRE. 

Jessica Mania has joined directly from GSP where she spent two and a half years, most recently as director of research and marketing. She previously worked at Business Finance Capital and Avison Young.

Michael Shemi has left the Federal Housing Finance Agency (FHFA) to join Guy Carpenter, the leading reinsurer. He becomes North America structured credit leader, a newly created role, and reports to Jeffrey Krohn, global mortgage and structured credit leader. 

Shemi will be responsible for developing credit risk transfer solutions in addition to analytics to support the growth of the reinsurance market to asset classes beyond the traditional buckets of property and casualty risks. He had been principal advisor with the FHFA since 2020 and before that worked at Moelis and Co and Cristofferson, Robb and Co.

Miami-based private lender Rok Lending has hired Avi Zukerman as managing director for debt and structured finance. Zukerman will divide his time between New York and Miami, and leaves his role as director for real estate acquisitions asset management at QRST Properties after two years with the firm. He previously spent three years as md of structured finance at Lev and had spells at ASG Equities, The Zar Group and Credit Suisse.

Property finance group Octane Capital has promoted Jamie Oxley to senior structured finance manager, amidst a raft of promotions. Oxley joined Octane from Wellesley Group in 2017 and is promoted from the role of senior credit manager. The business has also promoted Richard Hollingsworth, Chris Harrison and Nicky Pack to the roles of head of short-term credit, senior credit and portfolio manager and senior credit manager respectively.

Tradeteq has appointed a new cfo, Doris Yeung, to its team as it pursues European and North American expansion. Yeung will work closely with the private debt and trade finance marketplace’s ceo, Christoph Gugelmann, in its London office to scale its securitisation service. She has previously served in senior financial strategy roles at MessageBird, Okta and KPMG.

Pivot Energy has expanded its structured finance team by hiring Jennifer Lyman to serve as senior director in Denver, Colorado. Lyman joins the firm from Amber Kinetics where she was a vp on the strategic development team, and in her new role will work on construction/term debt and tax equity transactions for renewable energy projects.

Moody’s Analytics has promoted Joel Penn to associate director in its structured finance team, based in Frankfurt. Penn is promoted from the role of assistant director two and a half years after joining the agency from European DataWarehouse, where he spent four and a half years. He previously worked at Inatec Payment, Logic Investments and Alexander David Securities.

S&P has hired DBRS Morningstar’s Cameron Moore as a senior analyst in its structured finance team, working out of Chicago. Moore leaves his position as a CMBS-focused senior analyst at DBRS Morningstar after four years with the agency. 

And finally, Sidley Austin has hired Allen & Overy’s Greg Lavigne as a partner in its energy, transportation and infrastructure group, based in its New York office. Lavigne specialises in renewables, alternative energy and energy transition, and works on transactions spanning structured credit, tax equity, private equity, joint ventures, mergers and acquisitions and project finance. He leaves his role as partner at Allen & Overy after two and half years with the firm and was also previously a partner at Akin Gump.