Contents

Capital Relief Trades

Completing the project

SRT Market Update

NatWest recently closed a project finance SRT transaction. The maturity of the deal is believed to be in 10 years, while both the tranche thickness and spread are described as “what is to be expected for the asset class” - albeit the latter is slightly tighter, as is currently the case across the SRT market.

By way of comparison, Intesa Sanpaolo’s June 2023 deal featured a tranche thickness of around 8.5%. However, that transaction referenced a mixed portfolio of project finance, large corporate and asset finance loans.

Joe Quiruga

Capital Relief Trades

UK SRT prepped

SRT Market Update

Lloyd’s is understood to be prepping a UK SRT deal, which will reference a portfolio of large corporate loans.

One source believes the transaction will have a tranche thickness of 7%-8%, similar to Deutsche Bank’s previous two CRAFT deals and Bank of Nova Scotia’s July 2023 Granville deal, all of which reference the large corporate asset class.

However, the source adds that UK trades “sometimes become a mix of large corporate and real economy assets”, perhaps explaining why the tranche thickness is similar to that of a North American deal (which tend to be thicker) and a pair of global deals from a major issuer’s well-known programme.  

The spread is expected to be in the high single-digits to low double-digit range.

Joe Quiruga

Structured Finance

SCI Start the Week - 22 April 2024

A review of SCI's latest content

*CRT Awards 2024*

The submissions period for SCI’s 2024 Capital Relief Trades Awards closes on 31 May. Apply now to secure your chance to be recognised and celebrated by the SRT industry at a gala black-tie dinner at RIBA HQ!

Qualifying period: 1 July 2023 to 30 June 2024. 

Award winners are decided through a two-step process, the first stage of which is a call for nominations. Based on these nominations, the SCI editorial team – in conjunction with an industry advisory board – will compile a shortlist for each category. The shortlist will then be published and the ultimate winners revealed during a gala black-tie dinner held at the Royal Institute of British Architects.

Final selections will be made by the SCI editorial team, based on submissions, colour from the market and our own independent research. Advisory board members will be required to sign confidentiality agreements and will be recused from judging an award that they are eligible to be nominated for.

SRT market participants are invited to put themselves, their colleagues, clients and their peers forward to be shortlisted. To aid in the judging process, brief written pitches along with supporting data can be submitted by those wishing to be considered for a given category. All written pitches should be submitted by 31 May.

*Please only include information in submissions that is ‘on-the-record’, as SCI reserves the right to use such information in an eventual awards write-up.* 

Many thanks to our advisory board members, comprising Alan Ball of Texel, Matthew Bisanz of Mayer Brown, Gina Hartnett of Schroders Capital, Olivier Renault of Pemberton Capital Advisors, David Saunders of Santander and Tony Viscardi of Atlas SP Partners.

For all the details on the CRT Awards categories and the nominations process, click here.

Last week's news and analysis
Barrier to entry?
SRT allocation under scrutiny
Job swaps weekly: ELFA names Rinaldi as CLO investor committee co-chair
People moves and key promotions in securitisation
Moroccan debut
SOFAC launches first synthetic securitisation
Not dead yet
Hope remains for a 'vibrant' Indian NPL securitisation market
RFC on agency second mortgage product
FHFA issues notice on proposed new product from Freddie Mac
Rithm anchors captive CLO platform
Sculptor Loan Financing Partners launched
Plus
Deal-focused updates from our ABS Markets and CLO Markets services

SCI In Conversation podcast
The latest episode is a special for International Women's Day in which SCI deputy editor Kenny Wastell speaks to Ruhi Patil, a counsel in Dentons' London office, about gender diversity and inclusion in the structured finance industry.
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’).

SRTx benchmark
SCI’s SRTx (Significant Risk Transfer Index), is a 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
2nd Annual Esoteric ABS Seminar
30 May, New York

Emerging Europe SRT Seminar
18 June 2024, Warsaw

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

Capital Relief Trades

Uncommon assets

SoFi Technologies CLN the forerunner of unusual asset CRTs

The imminent SoFi Technologies CLN securitizing student loan exposure is said to be the harbinger of a new class of CRT deals in which lenders hedge exposure to rarely seen asset pools.

Although this type of transaction incorporates uncommon assets these asset are often homogenous with, for example, shared underwriting characteristics, and are consequently easier to sell.

Even though the loans are to borrowers with limited default potential their risk weighting is calculated according to the standardized methodology and will often come in at 100%. So, these CRT deals are purely for capital management and not credit hedging.

“I’m hearing that banks with one-off asset classes where there are only three or four other banks in the market which own the same category of loans are saying ‘Well I should probably do a CLN because this asset class is less variable than something like general commercial real estate or general corporate loans,’” says a source.

For example, all the SoFi student loans were originated in the same way and are also term loans. This makes them more attractive to CLN buyers.

SoFi Technologies owns a fintech lender which several years ago bought the student loans from high earning debtors such as doctors and lawyers. These borrowers were offered a lower rate of interest, but by entering the private market they lost the various layers of government protection and will not be included in President Biden’s massive student debt forgiveness programme.

The imminent CRT deal is done in conjunction with Bayview Asset Management, based in Florida. It is thought that Bayview will sell portions of the deal back into the market. It recently did this with a portfolio bought from Huntingon Bancshares. Bay View was unavailable for comment.

The reference pool is reported to be US$2.5bn with US$200m sold into the market.

In other news, Wells Fargo, the fourth biggest bank in the US with assets of over US$1.9trn, is said to be readying its debut CRT deal.

Simon Boughey

Capital Relief Trades

Fresh mandate

Frank Benhamou joins Cheyne Capital

Cheyne Capital has announced that Frank Benhamou has joined the firm as Portfolio Manager for its Risk Transfer strategy. The announcement followed the news that the London-based firm was re-entering the SRT market, having previously been active from 2004-2018.

Prior to joining Cheyne, Benhamou spent 17 years at Barclays where, inter alia, he set up and led the Colonnade programme which has grown to become one of the largest SRT platforms globally.

Commenting on his move from issuer to the buy-side, Benhamou describes a desire for “a new challenge.” He says: “What drew me to Cheyne Capital was their steadfast commitment to SRT, with a long-term perspective. It's an institution with a deep-rooted dedication to the asset class, which wanted to build a professional team and a dedicated strategy to achieve ambitious goals."

Reflecting on the motivations behind Cheyne Capital’s fresh return to the SRT market, Benhamou points to the maturity of the market. He notes: “The market has undeniably matured since 2018, marked by heightened issuance and a broader array of products and asset classes. With Cheyne's robust track record in SRTs, as well as in corporate investments and across various asset classes, it felt like a natural progression for Cheyne to re-engage in this space.”

In terms of strategy, Benhamou further highlights Cheyne Capital’s credit underwriting and structuring expertise. He notes: “Given Cheyne's strong reputation as a corporate credit powerhouse, we're poised to capitalise on numerous opportunities within the large corporate trade arena, tapping into our extensive resources and expertise.”

He continues: “However our strategy maintains a relative flexibility, enabling us to explore diverse asset classes and jurisdictions. Our focus effectively lies in identifying and seizing the most fitting opportunities aligned with our objectives.”

Looking ahead, Benhamou shares the widespread view that the SRT market is sustainably growing and expanding. He concludes: “Q1 has already been significantly busier than in previous years. Generally the market has exhibited a robust growth rate of 20%-30% year-on-year and we anticipate the market to maintain or even surpass this trajectory for the current year.”

Vincent Nadeau

Capital Relief Trades

Bridging the gap

Syndicated solution launches for portfolio insurance

As appetite for structured credit solutions continues to grow, insurance balance sheets seem increasingly well suited to meet this demand. However, this brings new challenges for investors, (re)insurers and issuers alike.

One such challenge is the need for banks to spread (re)insurer counterparty risk across several counterparties. The number of insurers needed in placing a transaction can be as high as six. The drawback is that each insurer has their own view on structure; as such, communication becomes more challenging and execution uncertainty increases.

This creates a barrier to growth, despite strong mutual demand for increased insurance capacity in the SRT and structured credit space. Furthermore, the need to thicken mezz tranches and the lack of funded capacity to meet this supply naturally means insurers could fill the gap.

This could be where solutions like Convergence, an insurance firm which describes itself as a “speciality and tech-enabled credit non-payment insurance underwriter”, come in.

Jeremy Hatchuel, co-founder at Convergence, explains: “We are part of a double-A rated insurance balance sheet and that capacity forms our anchor capacity for what we can deploy. Through our platform, expertise and track record, we can demonstrate the merits of the product to our (re)insurance partners, enabling them to participate in these transactions alongside us.”

He continues: “Convergence was founded with the goal of providing the benefits of a syndicated solution with a single point of contact. Essentially, we are trying to meet the huge amount of bank demand for portfolio insurance by growing insurance capacity with us.”  

Currently, Convergence can write US$45m tickets on any transaction split across two separate insurance balance sheets. The aim is to continue to grow this capacity pool by converging additional insurance capacity from those that may not have the internal capability, tools or resources to focus on the asset class, according to Hatchuel.

In this way, Convergence can act as a gateway into a market which can be difficult to navigate for some insurers. In some ways, therefore, the firm seems to be acting in an advisory capacity. However, founder and ceo Stephen Pike says a helpful analogy would be for funds, akin to the GP versus LP structure.

“Take any well-established SRT fund: it has to pitch, educate and bring investors along. Structured credit funds raise capital from asset managers, pension companies, family offices etc, who have appetite for SRT but do not specialise in it. We have a similar approach here; we have the expertise and have built the technology and analytics to bring to market new insurers alongside us,” he observes.

He continues: “We have to be able to share data on a regular basis and share exposures too. As Jeremy says, we hope to get to US$70m ticket size soon and will hopefully reach US$100m tickets by the end of the year. We will build and grow from there.”

Pike believes that now is the time for a solution like this, with a lot of insurers trying to get into the SRT and credit portfolio market. “There just hasn’t been this cross-pollination of capabilities from banking to insurance. We felt that for the insurance market to scale to the size of the opportunity, it needed a solution like this.”

So, is there any difference between Convergence and a standard SRT fund, besides the (re)insurance focus? The pair says the group focuses more strongly on risk-adjusted returns. With a mandate that doesn’t focus only on return hurdles and a unique cost structure for unfunded capital, Convergence can adopt a rigorous fundamentals-based approach to risk analysis.

Pike states: “Effectively, we offer capital relief solutions, which is what banks are looking for. But we’ve set ourselves up as a one-stop solution and we can have a much more flexible approach to providing those outcomes on a pool of loans. We are not constrained by an SRT-only mandate.”

Both Hatchuel and Pike previously worked at (re)insurer Canopius, which is involved in the structured credit space. As such, Hatchuel observes: “We’ve always insured SRT. But there’s an increase in the relevancy of insurance in SRT and credit portfolios and we felt in order to fully capture that opportunity, we needed to be set up in a completely bespoke data and technology-led platform.”

He adds: “Large insurance companies are very diversified. They are active in many lines of business where credit is a small part. It was our experience, that by virtue of those competing technology needs, incumbent carriers are not set up to fully capture the scale of the opportunity available using legacy systems. Convergence is a direct response to that.”

Both are keen to point out that Convergence’s capacity goes beyond SRT, focusing on structured credit in general and bespoke portfolios. “We are very much driven by tailoring solutions to what the bank wants,” Hatchuel summarises. 

Convergence will initially focus on Europe and North America and aims to underwrite through a Lloyd’s consortium led by Beat Capital Partner’s Syndicate 4242 (SCI 19 April). Its approach will leverage a unique combination of technology and data analytics, powered by a proprietary algorithmic modelling platform developed in partnership with University College London (UCL). This platform enables Convergence to swiftly integrate, enhance and utilise the extensive data provided by financial institutions. 

Joe Quiruga

ABS

FFELP loan 'waivers' proposed

Market updates and sector developments

The US Department of Education last week published a notice of proposed rulemaking (NPR) in the Federal Register regarding debt relief for certain federal student loans, including certain FFELP loans held by ABS trusts. Comments on the proposals are due by 17 May and the department aims to finalise the rules in time to start delivering relief this autumn.

The NPR includes nine rules that permit separate and distinct types of waivers using the Secretary of Education's longstanding authority under the Higher Education Act. Of these rules, eight are applicable to loans held by the department, while a ninth addresses ‘commercially held’ FFELP loans. The total estimated cost of these rules equals US$162.4bn, according to a BofA Global Research report.

BofA analysts anticipate that the eight rules applicable to loans held by the department will lead to higher consolidation activity and, consequently, a spike in prepayments in FFELP student loan securitisations. For these FFELP loans, the Secretary of Education would have the authority to waive repayment of the outstanding balance of a FFELP loan: when a loan first entered into repayment on or before 1 July 2000; when the borrower is otherwise eligible for, but has not successfully applied for, a closed school discharge; or when the borrower attended an institution that lost its title IV eligibility due to a high cohort default rate (CDR), if the borrower was included in the cohort whose debt was used to calculate the CDR or rates that were the basis for the institution's loss of eligibility.

Under the proposed rules, the secretary would notify the lender that a loan qualifies for a waiver and the lender would submit a claim to the guaranty agency. The guaranty agency would pay the claim, be reimbursed by the secretary and assign the loan to the secretary.

The department estimates that the net budget impact for the FFELP loan waiver will be US$17.1bn, which the BofA analysts believe mostly reflects the outstanding balance of FFELP loans to be forgiven. “We would not be surprised if the FFELP loan waiver is challenged in the courts or Congress under the Congressional Review Act,” they observe.

The department intends to publish a second draft rule focused on providing relief for borrowers experiencing hardship in the coming months.

Corinne Smith

Structured Finance

Final FCA, PRA rules 'imminent'

Market updates and sector developments

HM Treasury has published a draft statutory instrument that outlines the next steps in the process of replacing the onshored EU legislative regime for securitisation with its own rules under the broader ‘Smarter Regulatory Framework’ (SRF). The draft Securitisation (Amendment) Regulations 2024 (Amending SI) will repeal the EU Securitisation Regulation on 1 November, implying that the new regime – including the new FCA and PRA rules that were consulted on last year – will come into force at the same time.

A Clifford Chance briefing describes the Amending SI as largely a ‘clean-up’ instrument that fills in gaps the market was already aware of, such as due diligence rules for occupational pension schemes (OPS), while indicating “the direction of travel” for the securitisation rules as they will be under the SRF. The briefing observes that unusually, the Amending SI makes a few very specific provisions to FCA and PRA rules, suggesting that the publication of the final versions of these rules is imminent. Indeed, the FCA Board is due to meet tomorrow (25 April), so the final FCA and PRA rules could be published shortly thereafter.

Regarding the securitisation due diligence rules that will be applicable to OPS in the UK, Clifford Chance anticipates that the substance - if not the precise form - of the PRA and FCA rules on due diligence will match, given that HMT, PRA and FCA have all expressed a desire that the rules applicable to OPS and those applicable to PRA and FCA firms should be aligned. Overall, the briefing suggests that the authorities appear to have taken onboard key industry requests for the new framework, including the addition of transitional provisions.

In other news…

ASRS mandates AXA for SRT investment
AXA IM Alts has been awarded a US$400m SRT investment mandate by the Arizona State Retirement System (ASRS), a state agency providing pensions, disability plans and retiree health insurance for over 500,000 public servants. ASRS is a self-described “early mover” in the SRT field, with this mandate representing the latest move in its strategy to increase its allocation to alternative credit investments.

AXA IM Alts has made more than 100 SRT investments already, 80% of which were bilateral trades. The firm says it can leverage its “established access” to more than 70 issuer banks globally.

It seems the US could be the prime target for the strategy, with the announcement of the news acknowledging the jurisdiction’s growing relevance to the market. The announcement also observes that SRT can “provide true diversification within the private debt universe versus traditional direct lending, alongside stable valuations and cashflows, even during periods of market downturn”.

Between 2022-2023, ASRS reported a return of 8.2%. The majority of its asset allocation is in public equities, where it targets a 44% allocation with a low of 34% and high of 54%. This is followed by credit (target of 23%), real estate (target of 17%), private equity (target of 10%) and interest rate-sensitive assets (target of 6%).

AXA IM Alts currently manages around US$200bn worth of assets. Deborah Shire, deputy head of AXA IM Alts, comments: “We are seeing increasing appetite from global pension plans for diversifying credit strategies, which can deliver compelling risk-adjusted returns against current market conditions. As a provider of SRT investment solutions for our clients for the past 20 years, we have seen - and accompanied - the accelerated expansion of this market over the past few years, which doubled since 2016 and we expect it to grow by at least 50% for the years to come.”

Dutch warehouse securitisation debuts
Dutch asset finance business LFH Lease retained Alvarez & Marsal as sole advisor to deliver its inaugural warehouse securitisation of €265m, backed by financial and operating leases, including residual value assets. Combining a bankruptcy remote SPV with VAT lending, the transaction – dubbed Project Wheel – represents the first warehouse securitisation of its type in the Netherlands.

The motivation behind the securitisation was to facilitate the company’s strategic pivot from an originate-to-distribute (OTD) model to an on-balance sheet lender. LFH had previously operated an OTD model partnering with a Dutch bank under a forward flow agreement. Due to regulatory pressure, the bank discontinued this product, resulting in immediate pressure on LFH to pivot its business model.

LFH needed a sizeable institutional debt structure in place to avoid limitations on growth, given its track record in originations. Additionally, the company’s medium-term funding position depended on identifying asset risk drivers and mitigants, as well as prospective financing counterparties that could act as aligned partners in its crucial growth stage.

Funding was provided by a partnership between Barclays and SCIO Capital. Senior and mezzanine note classes were issued by the SPV, while the equity was retained by LFH. The transaction was structured with VAT funding to optimise the funding efficiency and minimise any cash drag.

Corinne Smith, Joe Quiruga

Structured Finance

Job swaps weekly: Cheyne Capital snaps up SRT veteran

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Cheyne Capital hiring an SRT veteran who recently left their role at Barclays. Elsewhere, Wilmington Trust has made changes to its global capital markets leadership team, while a risk transfer specialist has left their position at The D. E. Shaw Group ahead of taking up a new role.

Cheyne Capital has recruited SRT veteran Frank Benhamou as portfolio manager for its risk transfer strategy. Prior to joining Cheyne, Benhamou spent 17 years at Barclays, where he set up and led the Colonnade programme, which has grown to become one of the largest SRT platforms globally. Cheyne recently announced its re-entry into the SRT market, having launched the latest vintage of its risk transfer strategy earlier this month (SCI 19 April).

Meanwhile, Wilmington Trust has appointed Susie Aliker as head of European Global Capital Markets taking over from Alan Geraghty, who is to transition to head of global capital markets product management. 

Based in London, Aliker will lead the firm’s UK, Ireland and Germany offices, and will provide corporate, trustee, custody, collateral, and agency services to corporations, as well as the structured finance and loan markets. She left her role as ceo at Tandem Bank in 2023 after two years with the business, having previously spent six and a half years at British Arab Commercial Bank, spanning roles as ceo and cfo. Prior to that she spent 15 years at Credit Suisse.

Wilmington said Geraghty will “lead ongoing customer-centric development of the global GCM product proposition”. He is based in Dublin and joined the firm 20 years ago, having previously worked at Dresdner Bank Latinamerika and Coopers & Lybrand.

The pair will be tasked with jointly leading a five-year program to expand the firm’s presence in the European market. They will report to Wilmington’s head of global capital markets Abby Mrozinski.

Syril Pathmanathan, senior vice president for regulatory capital optimisation strategies at The D. E. Shaw Group, has left the business ahead of taking up a new role. Pathmanathan joined the investment manager in 2016. He previously spent around 11 years at Credit Suisse across two spells from 2004-2010 and 2011-2016.

Freddie Mac has named Christian Valencia as head of credit risk transfer. Valencia was previously vp, SF CRT capital markets, having rejoined the GSE in May 2014 after a stint there in 2003-2004. He has also worked at Fannie Mae and the Inter American Development Bank.

Olivier Beroud has been appointed executive chair of ARC Risk Group, the parent company of ARC Ratings and ARC Analytics. Beroud is a veteran in the rating agency industry, with a career spanning 35 years - including a 10-year stint at S&P, five years as ratings advisor for Barclays Commercial and five years at Moody’s, where he was responsible for the EMEA region. From 2016, he has run his own consultancy and fulfilled various INED roles, notably for GCR Ratings in South Africa and for ARC Ratings in Europe.

Remaining within the ratings agency space, Scope Group has promoted Florent Albert to executive director for structured finance sales, based in its Berlin office. Albert joined Scope in 2017 and is promoted from senior director, where he has led the structured finance commercial real estate loan and CMBS rating team. He previously spent three and two years respectively at Barclays Investment Bank and BGL BNP Paribas, with both roles based in Luxembourg.

Independent trust and corporate services provider Cafico International has appointed Beata Frois as commercial director, capital markets, based in London. Frois has over 20 years of experience in the financial sector and specialises in structured finance, conventional debt, syndicated loans, escrows, repack and PEF products. She was previously director, business development at HSBC Issuer Services, which she joined in August 2007.

Merchants Capital has promoted Evan Gibson to executive vice president and head of capital markets, based in New York. The capital markets team focuses on creating liquidity and capital relief, and supporting the provision of financing solutions for multifamily and affordable housing developments. Gibson is promoted from senior vice president, having joined the business four years ago. He previously had spells at Dwight Securities Management and Merrill Lynch.

Blue Owl Capital has hired Future Fund’s deputy chief investment officer Alicia Gregory as an md, based in its Sydney office. Gregory joined Future Fund in 2019, having previously spent 17 years at Australian pensions, insurance and superannuation group MLC. While at MLC, she held a number of roles including chairing the executive committee and leading the private equity program. Blue Owl’s credit arm primarily invests in direct lending, though its liquid credit team focuses on the management of CLO portfolios and investments into third-party CLO equity and junior mezzanine tranches on behalf of separately managed accounts.

Affinius Capital md Samir Tejpaul has joined real-estate-focused private equity and private debt manager Madison Realty Capital as md and head of capital markets, based in New York. Tejpaul leaves Affinius after six years with the firm, the first four-and-a-half of which were spent at Square Mile Capital Management. Square Mile was acquired by USAA Real Estate in 2021 ahead of a subsequent merger and group-wide rebrand to the Affinius name. Tejpaul previously spent six years at Deutsche Bank.

And finally, credit-focused investor Aeon Investments has appointed private equity and private debt veteran Bosworth Monck as a member of its advisory board. Monck was most recently global head of client relations at the World Bank Group’s private sector arm, The International Finance Corporation, leaving his position in 2021 after 10 years with the group. He previously held partner or founder roles at Earth Capital Partners, IBIS Capital and OLEA Capital Partners, as well as holding senior positions at EMP Global and JP Morgan.

Aeon describes its structured credit approach as targeting “segments that offer competitive returns on a risk-adjusted basis with lower levels of correlation to risk assets,” with a specific focus on real estate, infrastructure, transportation, and private debt.

Corinne Smith, Kenny Wastell

Structured Finance

ATLAS attracts MassMutual commitment

Market updates and sector developments

MassMutual has become a minority equity owner in ATLAS SP Partners and a capital partner to the ATLAS platform. As part of the multi-billion-dollar commitment, MassMutual has also agreed to invest in Apollo’s asset-backed finance (ABF) franchise.

These investments will allow MassMutual to access predominately investment-grade, asset-backed credit originated by ATLAS SP and across the broader Apollo ecosystem, alongside Apollo’s retirement services businesses. The commitments will also bolster ATLAS SP’s capacity to provide warehousing and other investment grade asset-backed solutions to the more than 200 financing clients of ATLAS SP.

Since its launch in February 2023, ATLAS SP has originated approximately US$24bn in assets to support its clients and the real economy. In addition to MassMutual, a wholly owned subsidiary of the Abu Dhabi Investment Authority made a cornerstone commitment to the ATLAS SP business in June 2023, and the business continues to attract third-party capital partners seeking to access high grade, senior secured asset-backed credit.

Apollo believes the private ABF market represents a US$20trn opportunity, primarily in the investment grade space.

In other news…

Alternative risk solutions practice formed
Marsh has launched a global alternative risk solutions practice, bringing together the firm’s expertise and strategy in parametric solutions, alternative risk transfer, captives and complex risk. The practice will leverage Marsh’s resources, data and technologies to drive innovation and accelerate the development of new risk solutions for the benefit of clients.

The global alternative risk solutions unit aligns existing capabilities from Marsh specialty, global placement, captive solutions and advisory. It also will work with Guy Carpenter to access broad capital pools, including ILS markets, for corporate clients. The aim is to provide clients with a comprehensive and integrated approach to optimising risk capital.

Leading the new practice is Christophe Letondot, who has 30 years of experience in financial services, including nearly a decade with Marsh working on alternative risk transfer, structured credit and parametric solutions. He will report to Pat Donnelly, president of Marsh specialty and global placement, and work closely with John Donnelly, global head of placement, and other Marsh leaders to integrate and deliver capabilities to clients.

Corinne Smith

RMBS

Italian mortgage disposal inked

Market updates and sector developments

Barclays Bank Ireland is set to dispose of its performing Italian mortgage portfolio via a securitisation. Funds and accounts managed by GoldenTree Asset Management have entered into a commitment letter under which they will purchase certain notes to be issued by a newly incorporated entity, Miltonia Mortgage Finance, to which the portfolio is expected to be transferred. Upon completion, the Barclays group will hold the most senior class of notes to be issued by Miltonia, in addition to the percentage of notes it is required to retain to comply with its regulatory risk retention obligations.

The transaction values the portfolio at approximately €3.3bn. As a result of the proposed securitisation, Barclays will receive cash proceeds of approximately €400m, including a small deferred consideration element paid from cashflow generated from the portfolio, in addition to the most senior class of notes.

Subject to the satisfaction of certain conditions and finalisation of the transaction documentation, completion of the sale is expected to occur during 3Q24. Upon completion, the portfolio will continue to be serviced by Barclays Europe for a transitional period. At the end of this period, it is intended that servicing of the portfolio will be transferred to a third-party long-term servicer.

The gross asset value of the portfolio is expected to be approximately €3.5bn at completion; it generated a pre-tax loss of circa €20m in the year to 31 December 2023. The transaction is expected to generate a pre-tax loss of approximately €260m for the year to 31 December 2024 and release approximately €900m of risk-weighted assets at completion.

Separately, Barclays is in discussion with certain third parties in respect of the potential disposal of the remaining non-performing and Swiss franc-linked Italian retail mortgage portfolios.

Corinne Smith