Contents

Structured Finance

Inside job

Internal ESG assessments and SPOs favoured

Second-party opinions (SPOs) are growing in importance as climate credit risks and sustainable impact efforts continue to converge. At the same time, although rating agency ESG criteria have developed extensively alongside regulation, many securitisation market participants still rely on internal ESG performance assessments and scoring.

“We treat a second-party opinion how we’d treat an opinion from any other credit rating agency,” stated one portfolio manager panellist at Morningstar DBRS’ 2024 European Structured Finance Credit Outlook seminar earlier this week. “It’s a useful source of information, but we obviously have to make our own minds up.”

Unlike the assessment of the physical and transitional climate risk to credit performance undertaken by rating agencies, SPOs examine the sustainable impact of deals (SCI 10 July 2023) – which is a growing consideration for investors. In fact, for many participants, assessing the environmental, social and governance criteria of securitisation transactions has long been a core part of the investment process and feeds back into portfolio management decisions.

“There’s always been an overlap between ESG and assessing traditional credit risks; it just wasn’t until a few years ago that we actually had to split it out,” the portfolio manager observed.

ESG-labelling has also been on the rise across transactions as sustainable development goals and reporting regulations have been centralised. Yet many appear to be avoiding such labels over concerns of prescribed due diligence being inferior to ever-evolving historical in-house assessments. Additionally, labelling of auto ABS is a specific issue as the ‘greenness’ of EV, AFV and hybrid vehicles remains subjective for market participants, given the debate around greening the auto space.

Toyota’s Koromo Italy auto ABS from last year notably eschewed an ESG label, despite having a 97% green portfolio (SCI 8 February 2023). The decision not to secure an ESG label for a deal - despite qualification for one - was understood by the panel to be the result of either not believing in the benefit or the worth of the label, or to enable the issuer to change the pool later on.

One panellist argued that SPOs can be of help in such scenarios – not just as an issuance assessment, but also tracking how an issuer commits to the criteria on a long-term basis. “Commitments are the reality, not just commencements,” they noted.

Many ESG-labelled deals themselves do not seek out SPOs. For some deals, this is the result of securitising straightforward collateral – although, for others, it is not always so clear-cut. Last year, just €2bn of the total €238bn in European structured finance issuance had SPOs.

“The motivation is there – regardless of whether the SPO is there or not,” stated another panellist. “The SPO can help explain these strategies in a digestible way, in one place, and explain the ‘why’ behind making sustainability decisions. SPOs can help issuers to mitigate that greenwashing risk.”

Assessment criteria for Morningstar DBRS, for one, relates to the issues of physical climate risks and transitional climate risks. Transitional climate risks pose a greater imminent threat to credit performance of securitisation transactions, given the rapid evolution of net-zero targets, as well as the rising concern with ESG from both consumers and investors.

Physical climate risks are not due to impact credit performance until the second half of this century – and, for now, much of the burden of these risks are being shouldered by the insurance sector rather than bondholders. “Insurance is a comfort now, but potentially not in the future,” commented the portfolio manager. “Something we do consider and we cannot ignore – and, as more data becomes available, it will become more pertinent in transactions.”

Auto emissions data and EPC ratings are already a prevalent consideration in the transitional risk side in the assessment of auto ABS and RMBS respectively - although they are imperfect measures, as EPC ratings, for example, differ between jurisdictions. Exposure to flooding, hurricanes and extreme hot and cold on the physical side could impact defaults and reduce recoveries in transactions even now. So, for RMBS investors, geographical concentration assessments are becoming a valuable component in their ESG testing.

EPC ratings are yet to affect housing prices, although they are already having some impact on buy-to-let RMBS where regulation is imposing minimum EPC requirements on landlords (SCI 13 June 2023). The mission to green the housing stock could be a major positive for potential securitisation issuance, whether support for borrowers to retrofit low-EPC rated homes is in the form of mortgage products (green RMBS) or consumer loans (green ABS).

However, for CMBS, the major concern for the office CRE segment is that the cost of greening the aging office stock could outweigh the desire for positive sustainable impact. Given upcoming refinancings, declining occupancy rates and demand for net-zero office spaces from tenants, CMBS deals backed by office buildings with low EPC ratings are exposed to substantial climate risk.

“Transition will have an impact on property values,” stated the portfolio manager, “and said transition will likely be a bumpy one.”

On the flip side, the cost benefit of green credentials is not yet as transparent as the dangers of climate change. While some correlations can be drawn between the performance of ESG-linked transactions like auto ABS or RMBS, this is not down to sustainability, but instead the fact that electric vehicles, solar loans or green mortgages are typically only affordable for more affluent borrowers.

The matter of a ‘greenium’ is a subject the panel understood to be an intentional component of the green bond market, so as to encourage green investment. However, the structured finance market overall has not yet seen enough ESG issuance to prove that a ‘greenium’ exists. Even in the Netherlands, where much of Europe’s ESG issuance has been, it is impossible to say whether a ‘greenium’ exists as Dutch deals already experience such high demand.

“However, logically speaking, there should be one,” argued the portfolio manager. “Maybe only by one or two basis points, but for a big issuer, that could make a huge difference.”

Claudia Lewis

Structured Finance

SCI Start the Week - 22 January 2024

A review of SCI's latest content

Last week's news and analysis
Back in the game
Citi sells SRT, more in the works, say sources
Fed checks banks' homework
CLN submission path is clearer, but Fed approval far from automatic
Gathering momentum
SRT market update
Hanging in the balance
UK green securitisation market falling behind
IACPM 'stands ready' to work with US regulators on SRT
Updates on a data sharing proposal and Georgia’s new EU ABS law
IFC, SG team up on sustainable finance
Updates on a Collaboration Framework and a strategic financing vehicle
Job swaps weekly: Permira Credit promotes pair to lead expansion
People moves and key promotions in securitisation
Radical reform?
ESMA disclosure consultation could pave the way for material improvements
SCI In Conversation podcast: 
Andrew South and Alastair Bigley, S&P Global Ratings
Sound the retreat
No end in sight for bank lending deficit
Plus
Deal-focused updates from our ABS Markets and CLO Markets services

Regulars

Recent premium research to download
Hotel CMBS – November 2023
The lodging sector is one of the few bright spots in the US CMBS landscape. This Premium Content article uncovers the reasons why.

Project finance CRT – November 2023
Synthetic securitisation is expected to play a key role in assisting Europe’s transition towards a more sustainable economy. This Premium Content article explores the significance of project finance SRT transactions within this context.

Data centre securitisation – November 2023
Insatiable demand for connectivity is fuelling a rise in data centre securitisation issuance. This Premium Content article tracks the market’s development.

(Re)insurer participation in CRTs – October 2023
(Re)insurer interest in CRTs is rising, but execution of unfunded transactions remains limited. This Premium Content article outlines the hurdles that still need to be overcome.

Utility ABS – October 2023
An uptick in utility ABS is expected as US utilities seek financial solutions for retiring the country’s aging fossil fuel fleet. This SCI Premium Content article explores how the proceeds from these transactions can be used to facilitate an equitable energy transition.

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

SCI Global Risk Transfer Report 2023: New frontiers in CRT
Sponsored by Arch MI, Man GPM, Mayer Brown and The Texel Group, the free report is available to download here.

SCI In Conversation podcast
In the latest episode of the SCI In Conversation podcast, SCI's deputy editor Kenny Wastell speaks to S&P Global Ratings’ md and head of EMEA structured finance research Andrew South and Alastair Bigley, md and sector lead for European RMBS, about the year ahead.
The episode can be accessed here, as well as wherever you usually get your podcasts, including Apple Podcasts and Spotify (just search for ‘SCI In Conversation’).

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
8th Annual Risk Transfer & Synthetics Seminar
1 February 2024, New York

SCI’s 3rd Annual ESG Securitisations Seminar
16th April 2024, London

Emerging Europe SRT Seminar
16 May 2024, Warsaw

2nd Annual Esoteric ABS Seminar
June, New York

CRT Training for New Market Entrants
14-15 October, London

Women In Risk Sharing
15th October, London

10th Annual Capital Relief Trades Seminar
16 & 17 October 2024, London

2nd Annual European CRE Finance Seminar
November 2024, London

Structured Finance

Building momentum

Chinese consumer ABS market tipped for growth

Chinese securitisation issuance posted a 7% decline in volumes last year. However, backed by solid mortgage originations, vehicle sales and foreign investor interest, China could well be on its way to long-term growth if its structured finance market can stay afloat.

After seeing the market’s first triple-A rated consumer ABS last year, the consumer segment is likely to steer the market away from any further decline with the rise of NPL ABS, micro and small enterprise (MSE) loan ABS and asset-backed plans (ABP), according to S&P.

NPL ABS issuance from banks could continue to build on recent moves to offload NPLs from retail loan books as banks seek to manage NPLs on their balance sheets. MSE ABS has also grown substantially in recent years, with volumes seen in 2023 showing an almost six-fold increase in size from 2018. New issuer numbers and investor interest are both set to rise, and market participants predict a favourite for 2024 to be consumer loans extended by NAFR regulated financial entities – followed closely behind by NAFMII and CSRC regulated entities (SCI 15 May 2023).

Given growing appetite from investors, ABP issuance from insurance asset managers is also set to multiply this year as they benefit from diversity of underlying assets and attractive yields.

S&P projects a 4.2% growth in the consumer ABS sector this year as the interests of investors, needs of originators and consumption-supporting public policy in China bolster the asset class, while the economy continues recovering.

Emerging asset classes are anticipated to pick up the slack in issuance volumes from the slow-down likely to be seen in the largest segments of China’s securitisation market – namely, auto ABS and RMBS.

Auto ABS is understood to face flat-to-mild growth in the year ahead, with up to 2% incline in light vehicle sales predicted for 2023-2024, and asset performance remains stable. RMBS is set for a similar trajectory, with a 5% drop in house sales and slowing mortgage originations. Although there are no major concerns for collateral performance, delinquency rates are set to stay elevated across RMBS after seeing an uptick in September and October last year, due to large prepayments, on top of a generally lagging local property market post-pandemic.

Overall, the outlook for collateral performance across China’s structured credit space is stable, as the market continues to recover from recent macroeconomic struggles and maintains low unemployment levels.

Claudia Lewis

Capital Relief Trades

Risk transfer round-up - 25 January

The week's SRT developments and deal news

Market news
BofA Global Research analysts believe that there is potential for 2021-2022 GSE credit risk transfer transactions to be upgraded, as their credit enhancement levels and mark-to-market LTVs continue to improve and delinquencies remain low. Rating agencies upgraded 292 CRT bonds in 2023, 35 of which were upgraded from non-investment grade to investment grade.

In particular, bonds rated BB/B but with a NAIC 1A rating could see upgrades. The BofA analysts cite the STACR 2022-DNA4 M2, STACR 2022-DNA5 M2 and STACR 2022-HQA1 M2 classes as examples of bonds that were rated as 1A by NAIC but BB/B by rating agencies. In total, they identify 13 low LTV bonds and seven high LTV bonds that are likely to be upgraded across the 2021-2022 vintage, based on their model.

Agency CRT paydowns totalled US$10.1bn last year, including all the CAS and STACR tender offers, while gross issuance was US$8.3bn. The agency CRT market currently stands at US$52bn outstanding and the BofA analysts project 2024 total issuance to reach US$8bn.

Market update
Momentum in the SRT market is evidently gathering pace, with investors describing an increasingly busy Q1.

Regarding the SRT pipeline, further confirmation has emerged that BNP Paribas is in the market with a trade referencing an investment grade large corporate portfolio, which is believed to be entitled Broadway. However, the bank’s high-yield trade has reportedly been pulled, with one SRT investor noting: “I think the pricing expectation was too low.”

Also joining the pipeline is Deutsche Bank, with a fresh deal from its established CRAFT programme. One SRT investor expects the trade to close in March and describes it as “not identical but very similar to what the bank generally tends to issue under the programme.” Last year’s CRAFT 2023-1 was a US$480m CLN that referenced a US$6bn global portfolio and priced at SOFR plus 11.75%.

Also rumoured to be prepping a trade is Standard Chartered, with the ninth transaction from its Chakra programme. Chakra 8 referenced a global portfolio of corporate revolving facilities, with the first loss tranche (0%-6.5%) pricing at SOFR plus 12% and the mezzanine tranche (6.5%-9%) at 4.75%.

Another bank in market is Caixabank, with a new mid-market and SME transaction. Back in 2022, the Spanish issuer finalised with the EIF a €112.5m first loss financial guarantee deal referencing a €1.5bn portfolio of Spanish SMEs. 

The SRT investor also indicates that Santander is marketing a large corporate transaction, referencing a global portfolio. “Q1 is becoming extremely busy,” he notes. “In the corporate and SME segment of the market, we are looking at around 13 or 14 ongoing discussions around potential trades.”

In terms of a recalibration towards the US market, the investor notes: “I feel the interest remains global. Of course, US deals are very interesting. But we have to continue to support and work with European banks, as they are still the predominant issuers of these transactions.”

Research
Seer Capital Management projects that pent-up US SRT supply could amount to between US$20bn and US$80bn, compared to current volumes of around €15bn of issuance per annum (SCI 24 January). In new research, the firm outlines its expectations that US issuance will grow considerably from the initial wave seen in 4Q23 following the Fed’s CLN guidance, as institutions that awaited ‘proof of concept’ come online.

The initial wave of deals – from JPMorgan, Morgan Stanley and US Bank, for an estimated aggregate portfolio size of US$37bn - had been prepared in advance of the Fed announcement. Seer notes that some of these deals priced at tight levels relative to recent prints from global issuers, as large private credit investors sought to enter the space.

“While relative pricing suggests that demand for reg cap deals outstripped supply as at the end of 2023, we anticipate significant supply in the next 12-18 months that will absorb current demand and more,” the firm says.

If all US banks with over US$10bn of assets are considered as possible candidates for SRT issuance, that includes 132 institutions with over US$23trn of assets. The top tier banks – such as JPMorgan, Bank of America and Citi – stand to be the largest and earliest adopters of SRT, particularly given the disproportionate impact of the Basel Endgame proposal on these institutions, according to Seer.

While issuance is also expected to penetrate down to the regional bank level, it will likely take more time. “Adoption of reg cap at the regional bank level may be less, as some may be reluctant to bear the costs in terms of fees and spread of a reg cap deal, and some may struggle to muster and coordinate the internal resources required to issue and administer a deal,” the firm notes.

SRT new issue pipeline

SCI SRTx indexes

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

Capital Relief Trades

Pilot transaction

IDB expands focus and lending capacity to the private sector

The Inter-American Development Bank (IDB), the main source of development financing for Latin America and the Caribbean, recently completed a risk-transfer transaction using credit-insurance protection with private insurance companies to optimise the use of resources and unlock capital for additional lending to the region. This is the IDB's first such transaction with the private sector. 

Previously, the IDB pioneered credit-substitution transactions and guarantees with other multilateral development banks (MDBs) and governments. Yasser Rezvi, head of asset liability management unit at the IDB, shares some background on the transaction and discusses the IDB’s future plans with the private sector.

Q: Could you give some background into the transaction?
A: The IDB is looking at a variety of structures on how to make capital management more efficient, in line with the G20 Review of MDBs’ Capital Adequacy Framework, which calls on us to make the greatest use of our capital for development purposes. What we're doing, in many cases, are pilot transactions, such as this one that allows us to increase our lending capacity and/or risk-absorbing capacity, without a direct capital infusion from shareholders.

We may do other transactions this year to test the rails on being able to book a transaction which achieves the balance sheet dynamics and creates the lending capacity that we need. The US$300m transaction is an intentionally modest amount of the bank’s >US$100bn sovereign loan portfolio, as it was designed as a pilot transaction, as part of the bank’s efforts to find innovative ways to increase lending capacity. All in the event that when we actually need greater capacity, then we can ramp up the size of the transaction.

The G20-sponsored Capital Adequacy Framework actions include a recommendation 3B, which clearly states “to scale up the transfer of risks embedded in the MDB loan portfolio to the private sector counterparties by accelerating the development of funded and unfunded instruments.” Therefore, part of the big initiative is to really pull in the private sector. This transaction works directly with insurers through an intermediary, but ultimately with insurers, on a global basis and insurers that cover the US, Europe and Asia.

In terms of structure, the IDB is entering into an insurance protection agreement to mitigate credit, as well as country concentration risk on our balance sheet. What the insurance protection agreement does is absorb a portion of our balance sheet exposure to our large sovereigns in the unlikely event that this exposure goes into non-accrual.

The transaction helps to reduce sovereign portfolio concentration through diversified contingent exposure to the insurers. The diversification of exposure reduces the capital requirements for the IDB, although it adds on some well-diversified exposure to the insurers. In this case, 14 insurers spread globally.

Q: Multilateral development banks play a central role in furthering sustainable development goals. Is collaborating with the private sector necessary to meet the UN’s ambitious Sustainable Development Goals?
A: The world faces a global “polycrisis” affecting human and economic development at an unprecedented scale. Progress towards the Sustainable Development Goals (SDGs) has been painfully slow. A much scaled-up global effort is thus required to eradicate poverty, accelerate inclusive socioeconomic development and tackle transboundary challenges.

It, again, goes back to the G20 mandate to pull in the private sector and capital markets to harness that capacity. Given that MDBs are mostly triple-A rated, have robust balance sheets and there is an excellent history of loan repayments from our member countries, [it] puts together a very good story for the private sector to be involved.

Q: The credit insurance market appears to know the sectors, asset classes and institutions in this space extremely well and perhaps better than any other investor base for these transactions. Is that a view you share?
A: Yes, the credit insurance market is very familiar with sovereign risk in the region and other regions as well, and they do have exposure on their own directly to the region. But in addition to insurers, we've also seen there are a lot of global financial institutions who are active participants in taking risks to sovereigns in the region and they're very eager to participate in other structures as well.

Q: Does the IDB have additional similar transactions with the private sector in the pipeline? What are the biggest challenges at the moment in closing such trades?A: We expect the IDB and other MDBs to explore a variety of structures and transactions, including this one, to achieve the G20-sponsored Capital Adequacy Framework Review goals of boosting MDBs’ lending capacity.

Regarding challenges, given that many of these are new structures or they're being slightly modified for the MDB space, one of the key challenges includes alignment with our rating agencies and the confirmation of the desired impact to capital and leverage. Another aspect is regarding pricing. We expect that the pricing for MDBs will be more favourable than you'd see on the private sector side, as a reflection of the strength of the balance sheets, ratings and performance of the loan portfolio.

Q: Finally, does the IDB plan on investing in synthetic securitisations?
A: We are very open to explore all types of capital market structures with the private sector, as well as with other MDBs and with government or supernational agencies to improve our balance sheet efficiency. So synthetic securitisations may certainly be considered as well.

Vincent Nadeau

ABS

TCW launches ABF business

Market updates and sector developments

The TCW Group has launched a dedicated asset-backed finance (ABF) business that will be anchored with over US$1bn in capital commitments from TCW, partners and affiliates. Dylan Ross has joined the firm as md and portfolio manager to lead the asset-backed finance investment efforts.

Ross brings to TCW almost 20 years of experience in alternative credit investing with a primary focus on structured credit and asset-backed finance. Most recently, he was a partner and portfolio manager at Brigade Capital Management, where he helped launch the firm's dedicated structured credit fund in 2014 and served as the co-head of the business from inception.

TCW’s expanded alternative capabilities will include lending against consumer assets, commercial and residential mortgages, hard assets and financial assets, leveraging the firm’s existing US$90bn liquid securitised business. The ABF business will be based in New York and the firm is in the process of building a dedicated investment team for the strategy.

In other news…

Churchill closes third 2023-vintage CLO
Churchill Asset Management has announced the closing of its US$400m mid-market CLO, Churchill MMSLF CLO III. The deal represents the manager’s third CLO priced in 2023 and forms part of a co-investment partnership with Mubadala Investment Company, which exceeds US$1bn.

As previously reported by SCI Markets (SCI 19 December), the transaction is structured with intent to comply with EU risk retention and article 7 reporting requirements. It comprised an equity piece sized at US$42.53m, larger than the US$36.85m indicated in an earlier structure.

Churchill says the deal, which has a collateral pool consisting of senior secured loans, attracted support from new and existing investors, with Mubadala holding the majority of the CLO’s subordinated notes. It has a four-year reinvestment period and the capital structure includes six classes of notes, with S&P ratings ranging from triple-A to double-B minus.

Fannie Mae prices first CAS REMIC of 2024
Fannie Mae has priced CAS 2024 R0-1, the first CAS REMIC of the year, through Bank of America as lead structuring manager and Cantor Fitzgerald as co-lead.

The US$819m transaction refers to a US$19.2bn pool of 60,000 single family home loans, all of which carry an LTV of between 60% and 80% and were acquired between January and April 2023.

It consists of US$328.1m A-/A M1 tranche priced to yield SOFR plus 105bp, a US$236.9m triple-B/triple-B plus M2 at SOFR plus 180bp, a US$182.3m double-B/triple-B minus B1 at SOFR plus 270bp and a US$71.9m B+/double-B B2 tranche at SOFR plus 400bp.

Cyber-attack credit impacts considered
Cyber-attacks affecting parties in structured finance (SF) transactions could have credit implications for SF notes, even if they do not cause - or seem likely to cause - a payment default, according to Fitch. The rating agency notes that a credit impact could result from interruptions to operational activities, a reassessment of the quality of risk management or spillovers to underlying obligor behaviour. As such, ultimately, a cyber-attack could lead to a missed bond payment that is owed on a timely basis.

The impact on transaction parties would depend on the nature, severity and duration of the cyber-attack and the back-up systems and mitigants in place. Fitch states that a missed payment resulting from a cyber-attack deemed payment force majeure may not immediately represent a default. But the agency would typically deem an extended non-payment of non-deferrable amounts due as a default on the obligation rating, at the latest, after 30 calendar days had elapsed from the missed payment date.

“Our SF analysis considers the presence and effectiveness of structural features of transactions to mitigate payment interruption risk from the default of the servicer or collection account bank. Some, such as liquidity facilities and deferrable bond payments, would likely mitigate risks from a cyber-attack that affected the collection process. We also consider factors that can reduce the impact of such events; for example, how frequently servicers transfer funds to the transaction account,” Fitch notes.

Structured Finance

Job swaps weekly: Dechert rings the changes in US securitisation group

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Dechert make two appointments to its US asset finance and securitisation team, including the appointment of a new head. Elsewhere, Fried Frank has appointed a structured finance expert as a London-based partner, while TCW Group has appointed a former Brigade Capital Management partner to lead its newly formed asset-backed finance (ABF) business.

Global law firm Dechert has promoted global finance partner Andrew Pontano to head of its asset finance and securitisation group and hired structured and leveraged finance specialist Casey Miller as associate.

Based in New York, Pontano works on deals for both public and private securities and structured finance transactions spanning a number of asset classes. The appointment is in response to the growth of the firm’s asset finance and securitisation group in recent years. Pontano joined the firm in 2003 and was promoted to partner in 2015.

Miller joins Dechert’s Washington DC office from Paul Hastings, where she spent eight years. She works with asset managers, sponsors and issuers, primarily on broadly syndicated loan and mid-market CLO transactions.

Meanwhile, former Dechert partner Cameron Mitcham has joined Fried Frank as a partner in its finance practice, based in London. He will focus on structuring credit funds and transactions spanning securitisation, structured finance and asset-backed lending, with a focus on complying with EU risk retention rules.

Mitcham was most recently employed as special counsel at Australian law firm Corrs Chambers Westgarth. He has worked with clients including investment banks, asset managers, private equity firms, pension funds and financial institutions on structures including CLOs, CDOs, ABCP conduits, RMBS, CMBS, covered bonds and WBS.

Dylan Ross has joined the TCW Group as md and portfolio manager to lead the firm’s newly launched dedicated ABF business, based in New York. He brings to TCW almost 20 years of experience in alternative credit investing with a primary focus on structured credit and asset-backed finance. 

Most recently, Ross was a partner and portfolio manager at Brigade Capital Management, where he helped launch the firm's dedicated structured credit fund in 2014 and served as the co-head of the business from inception.

JP Morgan veteran and md Aymeric Paillat is to leave the firm after 17 years to take up a new role as a structured credit-focused portfolio manager at hedge fund Sona Asset Management, according to a report by Reuters. Citing a person familiar with the matter, the report states that Paillat will take up the new role in April and will be based in London.

Regions Bank vice president Elliott Mulkin has taken up the role of director at both Cushman & Wakefield and Greystone Servicing Company, working on their capital markets equity, debt and structured finance and loan origination groups. The dual role is part of a partnership between Greystone and Cushman & Wakefield's multifamily advisory group.

Mulkin leaves Regions Bank after five years with the business, having previously worked at CBRE and the US Senate. In his new role, he will be based in Birmingham, Alabama, and be responsible for originating and structuring senior loans including Fannie Mae, Freddie Mac, FHA, bridge and private label options, the firm says. Reporting to Greystone’s Atlanta-based senior mds Charlie Mentzer and Brad Waite, he will also provide debt advisory services to clients.

Intesa Sanpaolo has promoted Joana Liachoviciute to director, based in London. She was previously vp, financial institutions solutions and financing at the firm, which she joined in January 2018. Before that, she was a financial analyst at Credit Suisse.

Former Challenger Investment Partners and CBRE executive Denee Denney has joined JLL as a director in its Australian debt and structured finance team, based in Sydney. Denney left her role as global investment manager at Challenger at the end of 2022 after four years with the firm. She was previously a director in CBRE’s Asia Pacific team.

UniCredit Bank Austria has promoted Kristina Kulya to associate director in its corporate structured finance team, based in Vienna. Kulya has been with the bank since 2016 and is promoted from associate for corporate structured finance. 

Société Générale CIB has promoted Dominique Pouani to structured finance deal manager in  its Paris office. Pouani joined the bank in 2018 having previously worked at Crédit Agricole CIB, BNP Paribas Securities and HSBC.

Luxembourg-headquartered primary debt market-focused issuer and software provider NowCM has appointed BNY Mellon structured finance and syndicated loan specialist Latoya Austin as senior transaction manager. Austin, who is based in London, leaves her role as senior transaction manager at BNY Mellon after 17 years with the bank. She previously worked at Deutsche Bank and Barclays.

And finally, Watson Farley & Williams has hired Dentons’ Anton Jarbøl as senior associate in its assets and structured finance team, based in London. Jarbøl leaves his role as associate in the banking and finance team at Dentons after six years.

RMBS

GSEs get set for social MBS

Market updates and sector developments

Fannie Mae and Freddie Mac have unveiled a new iteration of their social scores, rebranding them as ‘Mission Index Scores’, which will serve as the basis for future social-labeled agency MBS. As part of the move, the GSEs have launched Single-Family Social Bond Frameworks and intend to begin disclosing new impact reporting metrics for investors.

Compared to the first Social Score iteration, the Mission Scores add three characteristics (affordable rental, borrowers residing in underserved markets and special purpose credit programme borrowers) and remove one characteristic (minority borrower). Additionally, many characteristics of the Mission Scores are subject to a lower 100% area-median income (AMI) cap than the original Social Scores, which had a 120% AMI cap. The aim is to further support underserved borrowers’ access to credit and affordable housing.

The Mission Index will begin to apply to pools issued by Fannie Mae beginning in March 2024 and for Freddie Mac beginning in June 2024. The enterprises expect to assign ‘social’ labels to single-family MBS meeting the Social Bond criteria beginning in June. The label will be applied to an MBS when its underlying pool exceeds a certain score in the Mission Index.  

The GSEs’ Single-Family Social Bond Framework is being rolled out in cooperation with the FHFA. Both Fannie and Freddie obtained second-party opinions from Sustainalytics, which acknowledge that the Social Bond Framework is credible and impactful, and aligns with the four core components of ICMA’s Social Bond Principles 2023.

The enterprises also plan to provide social MBS impact reporting annually beginning in 2025, which will help market participants understand the effects of the loans underlying their social MBS investment.