Contents

Whole business securitisations

SCI in focus: Hot water

Thames Water, whole business securitisation and the challenge of debt financing

Crisis on the balance sheets of the UK’s largest water utility, Thames Water, is exposing major failures of the political, regulatory and financial systems – not whole business securitisation (WBS).

In late October, a court date was set for 17 December to discuss Thames Water's future. In the meantime, WBS remains centre stage in most conversations linked to the company.

Once hailed as an efficient means for water companies to fund the critical infrastructure repairs and improvements they inherited upon privatisation, rising interest rates and regulatory pressures have now brought WBS back under public scrutiny.

Water utilities and securitisation have become increasingly vilified over time by the British public and press following the 1989 Water Act – which privatised water in England and Wales – and the 2008 financial crisis. However, the truth of Thames Water’s current plight is far more nuanced than first meets the eye.

The business was fined £104m in October for illegal sewage discharges into rivers and seas, as the backlash surrounding water quality and pollution in England and Wales persists. Such incidents are often widely attributed to a lack of investment in maintenance and infrastructure.

Many critics point out that Thames Water – which is struggling to manage a debt pile of more than £15bn – paid dividends worth £37.5m and £158.3m in October 2023 and March 2024 respectively. Critics cite this as proof that the privatisation model prioritises payouts over investment. 

However, in its annual results published in July, the company argued that it took the view that these dividends were “required for the financial stability of the operating company, Thames Water Utilities Limited." It added that "no distributions were received by external shareholders".

Some market participants argue that the ongoing financial difficulties at many British water companies are often oversimplified and painted to be tales of corporate greed. As one partner at a leading international law firm points out – the financial issues at Thames Water are not simply to do with dividends or shareholder payouts.

“I don’t think it’s a case of private equity investment being motivated by selling assets and taking dividends out,” states the partner. “These are regulated businesses after all. Sure, in some cases dividends have been paid, but if you look at Thames Water for instance, the current owners of Thames have never taken a dividend since they bought in, several years back.”

Water utilities benefitted from a decade of cheap debt, and during this time were easily able to raise the capital to fund the capex plans agreed with Ofwat, England and Wales's water services regulation authority. However, as one partner argues, Ofwat’s focus during that time was very much on keeping customer water bills low, meaning that the opportunity to fund the large capital projects that Ofwat is now requiring in a more benign interest rate environment was missed.

The ambitious targets being set by Ofwat are against a backdrop of an increased cost of debt, the impact of climate change and a shift in political and public attitudes with respect to the performance of water companies (operationally and financially). Those water companies with higher levels of gearing, including Thames Water, are the first to feel the strain. 

The reason for the higher level of gearing that the securitised water companies have dates back to the flight from equity in the early noughties.

“The money for a lot of the investment that has been made since water companies were taken private wasn’t readily available in the public equity markets,” says the partner. “So it had to come from the private debt markets, and came in a very efficient way against what was viewed as a highly supportive legal and regulatory framework.”

Historically, how public utilities funded themselves had always been a matter for the companies, not the regulators. And WBS has been a key tool for water utilities to raise funds for upgrades and repairs at an attractive cost of capital.

“In terms of those companies that have got greater leverage because they have in place whole business securitisation programmes, that was a very efficient way of funding the capital expenditure requirements that they were being set,” says the partner. “The efficient cost of capital helped keep customer bills lower.”

Lacking flexibility
Of course, the type of WBS utilised by Thames Water is not the same as the ‘standard’ WBS transactions seen from the likes of the AA and Centre Parcs in the UK – where creditors can ultimately step in and take control of the operating business in a default situation by appointing an administrative receiver. For water utilities this is a right reserved to the government through the making of a special administration. 

Nor is WBS a securitisation in the classic sense, either driven by regulatory capital requirements or the desire for off-balance sheet financing. “These are on balance sheet secured financings with full recourse to the relevant water company,” the partner clarifies. “The WBS financing structures borrowed from some of the traditional securitisation technology helped the company to achieve a notch-up on its investment grade issuer debt rating, leading to more attractive costs of funds.”

However, the rigidity of the WBS model in the current climate could prove to be an issue. “The difficulty that the companies have today in the UK with their securitisation programmes is obviously they’re more highly levered and less resilient to shocks or changes in regulatory approach,” says the partner. “They’re not flexible financings.” 

They continue: “You can’t easily collapse them or change them, hence why Thames is now proposing a restructuring plan with the prospect of cramming down one or more dissenting classes of creditors. This lack of flexibility within a WBS structure makes it much harder to source the equity required for AMP8 and beyond at the level of returns that the regulator is currently allowing.”

Historically, water utilities in the UK were considered the crème de la crème of investment opportunities. Contrast to now, where the current owners of Thames Water declare the company to be uninvestable.

"Outside of government debt, it was considered to be the safest form of investment you can make in the UK – the gold standard - so it’s extraordinary,” says the partner. “One can always look with the benefit of hindsight, but I don’t think anyone honestly could have envisaged that we could be in a situation where a regulated utility water company – monopoly provider in the UK – would be in a situation where it may run out of money.”

WBS has been a financing tool used by many acquirers of water utilities across the UK since privatisation as a result of the immensely costly problems inherited – including, in the case of Thames Water, the updating of the Victorian sewer systems.

“The reasons why these companies chose to adopt the financing structures that they did were good reasons at the time,” says the partner. “If Thames Water had funded itself as a 55% debt to RAB gearing in line with the regulator’s new paradigm, then unarguably it wouldn’t have been in this position. But at the same time, would it have been able to have funded all of the Victorian mains replacements and other capital expenditure required over the last 10 to 15 years when the public equity markets weren’t there for that and without customers having to foot the bill through significant increases in their bills?”

Contagion risk
Of course, Thames Water is far from alone in its present plight – albeit the pressures on the company are at present greater than other fellow water companies and the urban density of London does provide its own unique challenges. If Thames Water were ultimately to be put into a special administration, there is a risk of contagion for other water utilities.

The partner observes: “If you’re going to get senior bond holders taking a haircut on what has always been a solid investment grade investment into a UK regulated utility monopoly business, then I do think the contamination issue for other companies in the sector must be a concern.”

Last week, Thames Water announced the date of a court hearing in December to consider a creditor-led restructuring plan to provide Thames Water with additional liquidity on a super-senior basis to existing secured creditors. “If that plan were to fail, then it’s hard to see what other options there are outside of a special administration,” says the partner. “There are no easy solutions. If there had been an easy solution, we would have found it by now.”

As Thames Water teeters on the edge of insolvency, the question of nationalisation is once again on the lips of many while a resolution to the current crises is sought. Special administration is not wanted by owners of Thames Water, the company itself or the British government. Analysis from Morningstar DBRS earlier this month shared that while the prospect of renationalisation remains “unclear”, the event of nationalisation could place significant pressure on the British economy.

“There may be within the creditor class, creditors who think they may be better off taking their chances in the special administration relative to some creditor-led restructuring,” the partner says. Whether this is the case remains unclear and open to speculation, as does the future of water supply and wastewater treatment in England and Wales. The crisis, meanwhile, continues to play out.

Claudia Lewis

ABS

Blueprint for sustainable growth

EIF's Jesper Skoglund and Georgi Stoev discuss EIB, EIF, and BPCE's €800m ABS initiative, crafted to drive sustainable SME growth in Europe

EIB, EIF and BPCE have collaborated on a new €800m financing initiative aimed at driving innovation and sustainability for SMEs. Structured as an ABS transaction, this joint venture is crafted to encourage significant lending to support European SMEs while fostering advancements in the green transition.

With €750m invested by the EIB and €50m by the EIF, the collaboration will lead to €1.6bn in fresh loans to power innovation and sustainability within France's business ecosystem. The structure of this BPCE ABS deal marks a notable “first” in EIF’s securitisation journey with the French banking group.

“We’ve done several transactions, both synthetics and true sales, in France,” explains Jesper Skoglund, structured finance investment manager at the EIF. “However, this is our first true sale transaction with BPCE.”

Skoglund further highlights the deal's unique evergreen revolving master trust structure, which he believes has “simplification benefits” and the potential to serve as a model for other European jurisdictions. This setup allows BPCE to continuously transfer eligible SME loans into the securitisation vehicle, with built-in subordination safeguards ensuring the structure's integrity and reliability for the foreseeable future.

A key innovation in this partnership is the integration of ESG criteria in the lending framework. "In every transaction, a portion of the new portfolio resulting from our investment must support green transition," says Georgi Stoev, head of securitisation at the EIF. Stoev adds that EIB’s 2024 investments in securitisation aim to build portfolios that are "100% green,” further reinforcing EIF’s mission to drive environmentally friendly financing across Europe.

The significance of this structure within the broader European finance landscape is substantial. Stoev explains that securitisation has become a versatile instrument within EIF's investment approach, as it effectively balances the financial needs of institutions with essential policy objectives.

“Whether we provide liquidity or capital, our investments are always tailored to meet the needs of originators in a way that serves the real economy, focusing on SMEs, green transition, and even gender balance objectives,” Stoev elaborates.

Beyond the specifics of the BPCE deal, this ABS transaction reflects the EIB Group’s broader commitment to ESG principles and sustainable finance. This year, EIF launched a new “green securitisation” label, focusing on 100% financing for green initiatives under the InvestEU mandate. Skoglund describes this as a “pragmatic approach,” underscoring the importance of financing new projects that foster sustainability, rather than backing existing assets.

The BPCE securitisation venture is also seen as a practical response to the evolving demands of the European financial market. With a rising focus on sustainability, EIF aims to support a wider range of sectors, including solar energy and green mortgages.

The flexibility in structure and sectoral reach is something Skoglund sees as vital to meet Europe’s ambitious ESG goals. "We want to encourage originators to produce new lending aligned with green and innovation-focused criteria,” he says.

As EIB and EIF continue to lead in Europe’s securitisation space, Skoglund and Stoev project further growth in collaborations with both existing and new originators. Stoev emphasises the EIF’s openness to working with new originators, reflecting a dynamic and expanding market.

"We’re doing about 25 securitisation transactions each year, and every year we encounter new originators, which is a sign of a growing market," Skoglund says.

As for the future, EIF and EIB are scaling up securitisation initiatives with a strong focus on renewable energy and sustainability, paving the way for a greener, more resilient European economy. The BPCE transaction demonstrates how securitisation, far from being merely a financing tool, is shaping into an engine for European innovation, resilience, and environmental responsibility.

Skoglund adds: “We will be active in general where we are currently active. It’s a common misconception to think that EIF and EIB only invest in SME portfolios, but our preferences are much broader than that.”

He adds: “We will only do blind pool portfolios, but as long as the portfolio is granular, we are relatively agnostic. So, granular SME portfolios, granular lease portfolios, granular corporate portfolios, granular consumer loan portfolios, granular residential mortgage portfolios – that covers most asset buckets you will find."

Skoglund further explains that the EIF avoids deals involving concentrated portfolios, such as commercial real estate or niche sectors like shipping. “Our focus will be on more granular pools," he continues, "and perhaps more and more important for us is where our originators could contribute to the sustainable transition.”

Selvaggia Cataldi

CMBS

Clean and replenish

Optimistic outlook for US CRE market is welcome news for CMBS and CRE CLOs

A rebound in activity in the US CRE market is pointing to brighter times ahead for both CMBS and CRE CLOs. Activity in the CMBS issuance market is a welcome sign after a prolonged down cycle, despite ongoing challenges in office and retail.

“We are seeing a strong turnaround,” states Jodi Schwimmer, partner at Reed Smith. “The market has been dislocated due to high interest rates, but over the last three months we’ve seen a real increase in activity – and with the rate cut a few weeks ago, we’re seeing even more activity.”

Research released by KBRA at the start of October highlighted renewed confidence in the CRE industry following the reduction of the Federal Reserve’s interest rate. The CRE sector, as of September, saw an increase of 176.5% year-over-year in issuance. This momentum is anticipated to be built on further, as KBRA projects a total of 15 CMBS deals will have hit the market in the month of October.

Indeed, Schwimmer notes the unique state of the market at present for practitioners as “restructuring is just as busy as the secondary issuances”. She adds: “What’s interesting is that we were in a down cycle for what seemed like a long time, and now we’re seeing an active default market and the new issuance cycle at the same time – the market is still cleaning out the old while it’s starting the new.”

“There was obviously some doom and gloom earlier this year, and people were pretending that things had changed from last year even though they hadn’t,” she explains. “Now, things really have so it’s a nice positive momentum to see the industry doing business again.”

With the pressure of debt maturities, borrowers are also growing increasingly willing to negotiate with lenders. “People are doing business, borrowers need to refinance their debt so the maturing walls are forcing borrowers to play ball with the lenders and come to terms with the new valuations of their properties.”

Single minded
The uptick in distress comes hand-in-hand with a significant volume of maturity defaults across the market – with 44.3% of new CMBS distress attributable to loans facing maturity or imminent defaults according to KBRA’s CMBS Loan Performance Trends report for October 2024.

Activity has significantly increased the CMBS collateral spectrum, including a pickup in single-asset, single-borrower (SASB) CMBS and CRE CLO issuance. The recent report from KBRA similarly exposes a strong pipeline for CRE CLO and SASB CMBS transactions. The respective presence of major players and active issuance in each of these asset classes points to strong investor appetite for these products.

“We’re seeing SASB deals more frequently now than we had in the first six months of the year, and also a pick back up of CRE CLOs,” says Schwimmer.  “There was a slowdown for a while in the CRE CLO market, but we’re seeing the issuance and desire to transact again on the CRE CLO front. Also, the repo market is busy, which gives us a clue that we’re going to be even busier in the securitisation markets – warehouses are just the parking place until they’re ready to go to the market with their secondary transaction.”

Private credit deals are coming in thick and fast too, and increasing their competition with the big banks.

“We are also seeing a hefty pipeline of private credit deals,” says Schwimmer. “Private credit providers could be very competitive in terms of lending packages for borrowers as private credit providers are more flexible – there are alternative products out there.” 

While the CRE space may appear to be heading in the right direction, some areas of concern remain – particularly around office and retail collateral in major cities in the US. Data shared by KBRA earlier this week notes the office sector has seen the steepest rise in distress, with delinquency rates increasing by 113bp from last month. This compares to a month-on-month increase in the delinquency rate for all private-label CMBS deals rated by KBRA of 16bp to 5.48%.

Other concerns include the aforementioned SASB CMBS market, which has faced much scrutiny given the issue of defaults – major players remain active issuers in this space. The mainstream media jumped on the bandwagon earlier this year and flagged SASB CMBS as a potential threat to financial stability in the US, labelling it ‘one to watch’ with the potential to trigger the biggest MBS crisis since the GFC. However, market experts insist no alarm bells are sounding for the asset class within the industry.

“The SASB market – in terms of defaulted loans – is not good for SASB investors,” Schwimmer states. “Few bond holders want to own a piece of a real estate property.  However, given the SASB deals currently getting done and in the pipeline, the defaults aren’t so pervasive that it will prevent the SASB market from continuing in earnest.”

She adds: “For the SASB loans that are in default, the special servicers and equity owners are working them out and there’s no more pretend and extend. There are properties changing hands through SASB defaults but that’s just the way the market works and is intended to.”

Indeed, following significant SASB CMBS deals from Blackstone and other major players, Schwimmer expects to see more “brand names” issuing in the SASB space. “That’s how it starts and then deals start getting done.” 

Of course, multifamily has also been a noted area of issue, although Schwimmer isn’t overly concerned about this area of the market. “People are watching multifamily, but given where interest rates are I don’t think multifamily is going to suffer anywhere near how office and retail have because the consumer ultimately still needs to rent a place to live. So there might be pricing adjustments and some extra volume in the market, but I still think multifamily is a stable asset class.”

Hunkering down
Additional pressures have been weighing on the US CMBS market in recent weeks with the heightened physical risk presented by hurricanes Helene and Milton hitting the Florida coast. However, investors remain largely unphased – showing little hesitancy towards CMBS with exposure to areas at greater risk of facing hurricanes – due to the insurance protections and diversification within transactions.

“There’s all of these bells and whistles these deals have in place to protect investors in these cases,” Schwimmer says. “Diversification helps mitigate risks. In SASB deals the risk is higher, but the risk is priced into the interest rate, and the yield that the investors are getting.”

Looking ahead, Schwimmer remains optimistic about the future of CRE CLO issuance alongside CMBS. “We are going to see more CRE CLOs because of the type of lenders and loans that are being made in this market.”

CRE CLOs are popular amongst the increasing number of private credit players in the market, as competition grows between alternative and traditional lenders.

Furthermore, Schwimmer expects conduit transactions to carry on as usual, as they continue to serve an important purpose in originating large volumes of homogenous debt.

“All in all, it’s a positive sign for the market, and a nice healthy pickup from where we were earlier this year,” says Schwimmer. “We’re already seeing a strong pipeline for the first quarter of 2025, so everything is pointing in the right direction.”

Claudia Lewis

Capital Relief Trades

Hitting for six

SRT market update

Barclays has reportedly issued its sixth Colonnade deal of the year.

The deal references corporate, revolvers and term loans with a 0-8.5% tranche and a 9.05% coupon denominated in USD.

One investor compares this to the Nordea corporate deal (SCI, 6 September), for which new details have emerged. On a 0-5.75% the deal priced at a coupon of 850bps denominated in Euros. Given the relative thinness of the tranche, the pricing may seem surprising. According to the investor, there are two potential possible explanations:

“US-denominated deals currently seem to price more lucratively than their Euro denominated counterparts,” they explain, “It could be that the US CRT market is less developed, but also the risk attached to US portfolios tends to be higher.”

Cheyne Capital is understood to have invested on both deals, while Pemberton Asset Management is similarly linked to the latest Colonnade trade.

Joe Quiruga

Capital Relief Trades

SCI CRT Awards: North American Law Firm of the Year

Winner: Mayer Brown

That Mayer Brown is the most active firm in the North American CRT market today is no surprise. While the uptick in the volume of CRT transactions in North America may be relatively new, Mayer Brown’s role in this market is historic and longstanding.

“We have been involved in the US CRT market from the earliest synthetic securitisation transactions and have helped pave the way for these products by assisting clients in navigating the complex interaction of multiple regulatory regimes involved in CRTs,” states partner Julie Gillespie, co-head of the firm’s structured finance practice. “Our firm is involved in most CRT transactions that come to the market in North America, with a practice evenly split between investor and bank representation.” The firm has been involved in over 30 CRT transactions just in the past year and a half.

2024 could be said to have been the year of the complete divergence between the US and European CRT markets. This is due in no small part to the vastly different regulatory regimes governing these transactions.

Matt Bisanz, a bank regulatory and financial services partner, notes: “The US regulatory landscape is still evolving and different agencies have different views and processes for banks to weed through. For many years, we have been advising bank clients on regulatory strategy involved in choosing a structure that suits the particular reference portfolio and goals of the bank.” A significant majority of the banks that have received a publicly available Reservation of Authority letter since US bank regulators begun issuing such letters were represented by Bisanz and the Mayer Brown team.

While the regulatory attorneys have been busy, so have the deal lawyers. “We are regularly engaged by anchor investors for CRT transactions that come to market and are often approached by multiple investors for each transaction,” says Sagi Tamir, a structured finance and derivatives partner in Mayer Brown’s New York office.

It is due to its deep bench and product expertise that the firm has been able to staff multiple, walled-off teams representing different investors in many CRT transactions. “We know our clients’ priorities and what each of them cares about,” Tamir notes. “And, because we have unmatched visibility into the market for each type of reference assets, we are able to advise investors how to best position themselves to win allocations, and then counsel them through efficient execution, which is important both to our investor clients and to the banks.”

When it comes to the banks’ representation, Mayer Brown draws on its award-winning structured finance practice. “We have decades-long experience with various asset classes and advising on CRT structures is a natural extension of that experience, since CRT is simply another option for capital and risk optimisation for banks and for exposure to various asset classes by investors looking for yield,” states partner Angela Ulum, co-head of global banking and finance.

The firm is a true partner, advising across business centres and stakeholders within the banks, facilitating communications with regulators, legal documentation and investor communication. “Banks do not just call us at the documentation stage; we are often brainstorming on structure, which can change quarter-to-quarter depending on market forces as well as the type of assets,” Ulum notes.  

As for the future of the CRT market in North America, “we are seeing new asset classes being considered for CRT,” Gillespie notes. Of course, with reference portfolios of new types of financial assets comes the need for product-specific expertise, and Mayer Brown has plenty of it.

“While the same CRT technology is used across different types of financial assets, there will still be asset-specific considerations such that a CRT referencing investment grade commercial loans will look different to a CRT referencing non-conforming residential mortgages,” Tamir notes. “Our product specialists help us efficiently adapt the CRT technology to different and sometimes brand new asset classes.”

Gillespie adds that the US market’s bifurcation between capital-market style deals and bespoke ones will become even more pronounced. “Unlike in Europe, this product is not standardised, and corners of the market never will be,” she notes. Evolving structural and regulatory complexity means that having a sophisticated advisor who has “seen it all” pays off.

For the full list of winners and honourable mentions in this year’s SCI Capital Relief Trades Awards, click here.

Capital Relief Trades

SCI CRT Awards: Service Provider of the Year

Winner: Credit Benchmark

Adoption of Credit Benchmark as a service provider has steadily grown among the SRT community in the last year, with nearing 40 major SRT participants now utilising Consensus Credit Ratings and Analytics to improve their transactional, decision-support and workflow productivity. The company fills a critical information gap by offering a timely, comprehensive and independent view of credit risk. These credit risk views, sourced from over 40 global banks, complement the information provided to investors by issuing banks, as well as from traditional credit rating agencies and third-party model vendors.

Mark Faulkner, co-founder of Credit Benchmark, says that greater data transparency will inevitably be a driver for growth in the SRT space in coming years. “While the SRT market has been steadily developing in the past two decades, regulatory headwinds have capped the growth trajectory of market,” he notes. “This is all changing now – sovereign wealth funds, pension funds and other new investors are entering the market. Access to data on the creditworthiness of hitherto unrated or private portfolios adds a level of reassurance that allows these entrants to confidently participate in the growth of the market.”

“I’m fond of the phrase ‘trust, but verify’,” Faulkner continues. “SRT is a relationship business – the investors have longstanding relationships of trust with their issuing partners.  Verifying the creditworthiness and acceptability of a portfolio and being able to communicate that information to internal and external stakeholders is incredibly helpful in getting deals done. Our data helps drive productivity – helping clients do more deals, at scale, more quickly.”

This rapid market expansion and Credit Benchmark’s role as a data provider to the industry came as somewhat of a surprise to the company itself, says Michael Crumpler, ceo of Credit Benchmark. “Since we launched in May 2015, we have continued to build our dataset and expand on the products and analytics we offer to credit risk professionals. We’ve seen broad adoption and demand for our products across many market segments, but if you had asked me a few years ago what our fastest growing segment would be in 2024, I certainly wouldn’t have guessed the SRT market.”

“It’s been a welcome surprise, and we’re now working closely with our SRT clients to make sure we are developing new analytics to fully meet their needs and to help this market expand as it should,” Crumpler continues.

The company has responded to this burgeoning uptake by investing heavily in its product and client success teams and by using technology like AI and machine learning to improve its product capabilities. One example is in the enhancement of its entity mapping service, which has been developed to leverage proprietary entity characteristics to identify and match at the exact legal entity level, utilising machine learning principals.

“Our clients have embraced our entity mapping capabilities to accurately identify and assess the credit risk in disclosed pools,” explains Faulkner. “The efficiency boost to due diligence is evident, and this added layer of credibility has seen our unique CB IDs being included in deal tapes to help speed up portfolio mapping and acceptance between trading parties.”

Credit Benchmark’s data has also proved valuable in the assessment of non-disclosed or blind pools, with Crumpler explaining: “Our geographic, industry and sector-level analytics offer valuable insights into the credit profile of a blind pool where no entity-level data is shared by the issuer. The fact that many of the issuing banks participating in SRT trades also contribute to our consensus dataset adds another level of credibility to the analysis we can provide.”  

When asked what 2025 holds for the SRT market and for Credit Benchmark, Faulkner speaks to the firm’s openness to listening to the industry and adapting accordingly. “Credit Benchmark is driven by technological innovation and client feedback, and we’re open to all good ideas,” he says. “As the market expands, adding more investors, more issuance, more geographic spread and more assets being financed, we wouldn’t be so hubristic as to think that is down to us. However, we’re dedicated to continuously expanding our capabilities to better support our clients and we hope that, in turn, we can play a small part in the growth of the market.”

Faulkner concludes: “It would be remiss of us not to thank every single one of our customers and prospects who we’ve learned from on our journey, and we wouldn’t be where we are without their engagement, curiosity and good nature, so I’d like to take this opportunity to say thank you.”

For the full list of winners and honourable mentions in this year’s SCI Capital Relief Trades Awards, click here.

Capital Relief Trades

SCI CRT Awards: Newcomer of the Year

Winner: EMX Partners

(Re)insurer participation in SRT deals has historically been limited to unfunded and non-STS transactions. EMX Partners is SCI’s pick for Newcomer of the Year in this year’s CRT Awards for establishing a platform that combines (re)insurer risk appetite with third-party funding to create rated repacks of SRT notes.

Since its launch in June 2023, EMX closed its debut transaction in 3Q23 and a second transaction in 2Q24. The firm’s strategy is built on two principles. First, (re)insurers will generally have the lowest cost of capital to hold the portfolio credit risk in SRT deals and will also generally have the highest credit rating of investors that need funding for these deals.

The second principle is that to participate meaningfully in the SRT market, a simple and programmatic platform is required to combine (re)insurer risk appetite with the necessary funding. This should be an attractive proposition from an issuer bank’s perspective, both quantitatively and qualitatively, since insurers have a much longer investment horizon than a typical alternative asset manager.

What then is simple and programmatic about the EMX platform? EMX ceo Adam Moses says that it simplifies, so far as possible, the “ask” of (re)insurers; in other words, they are asked to only protect the returns on the SRT instrument. Additionally, by establishing a rated note issuance programme with standardised documentation which has been reviewed by most of the magic circle, the platform offers a simpler financing instrument to its funders.

The fact that the repack vehicle's notes are rated is where EMX’s key innovation lies. The rating element allows for a simple and capital-efficient way of lending into the structure, in return for an attractive margin for what is highly rated insurer risk. Furthermore, it opens the door for banks in European countries where a ratings floor is in existence to participate in STS deals.

“We view ourselves as building a complementary facility that allows (re)insurers to access risks, exposures and premium that they wouldn't otherwise be able to access,” Moses observes.

Looking ahead, he expects the expansion and diversification of the investor base to benefit the SRT market more globally. “It can be argued that the SRT market follows a buy-and-hold model and therefore lacks in liquidity. Until we get to a point where the investor base in the market is drawing on all sources of risk capital, I think it will remain very illiquid. Therefore, it is to the benefit of the market that the greater liquidity that the (re)insurers can bring to it is brought to bear,” he concludes.

Honourable Mention: LuminArx Capital Management
LuminArx, a US$2.4bn asset manager founded by Gideon Berger and Min Htoo, has been highly active in the SRT space. The firm has deployed over US$600m in SRT investments since launching its first fund in September 2023. Notably, the firm was among a select group of investors invited to participate in JPMorgan’s inaugural corporate SRT, Project Appia.

Following its initial SRT activity, LuminArx launched LuminArx SRT Fund Holdings, a dedicated SRT fund, which completed a closing this past August. The fund's flexible mandate and diverse team expertise allows for capabilities across asset classes (corporate debt, consumer loans and real estate debt) and structures (synthetic and cash).

For the full list of winners and honourable mentions in this year’s SCI Capital Relief Trades Awards, click here.

Capital Relief Trades

SCI CRT Awards: Outstanding Contribution to SRT

Winner: International Association of Credit Portfolio Managers (IACPM)

The IACPM is SCI’s pick for the Outstanding Contribution to SRT award this year, for being uniquely the voice of the SRT industry. Not only does the association espouse a collaborative and consensus-driven approach to advocacy, its initiatives also provide much-needed transparency into what remains an opaque market.

The IACPM was established in 2001 by 11 founding bank members to further the measurement and management of portfolio credit risk. But the genesis of the association began in the 1990s, at a time when a handful of banks in New York and London started pursuing a more sophisticated and dynamic approach to managing their credit portfolios.

“With the advent of securitisation, secondary loan markets and other tools that created more liquidity, credit became more sophisticated, but most banks were still managing their portfolios in the traditional way. In the 1990s, a few risk departments began analysing portfolio concentration and other metrics - as well as the inflow and outflow of credit - and we began to see the use of CDS to hedge certain names and single-name concentrations,” explains Som-lok Leung, executive director at the IACPM.

Leung himself was recruited in May 2005 from Moody’s KMV (now Moody’s Analytics), where he had served as a senior director for client solutions. Before that, he was director of risk and credit policy at Nomura, director of credit risk control at UBS and a consultant at Oliver Wyman.

For a while, the IACPM membership consisted only of banks. Then Swiss Re joined the association, along with some other (re)insurers and some ECAs. They were followed by investors - all of which are active in the SRT market – as well as MDBs and insurance brokers. Membership currently stands at 146 firms.

“These non-bank members had an interest in joining the IACPM because of their significant interactions with banks,” Leung observes.

The association is widely recognised for its biennial benchmark survey, ‘Principles & Practices in CPM’ (credit portfolio management), which polls members on methods of both onboarding risk at the front end, as well as mitigating and transferring it at the back end. Post-financial crisis, asset sales has most often been cited as the top tool for the back end, while funded and unfunded SRT have hovered around the top three and top six spots respectively.

Last year, for the first time, survey results pointed to credit insurance as the most important tool for the back-end risk mitigation efforts. However, Leung anticipates that SRT will be voted into the top spot next year.

“SRT is one portfolio management tool among many, but it is becoming increasingly more important. Given that IACPM is a relatively small association, we try to operate in a space that is not duplicative and where credit portfolio managers are uniquely impacted – SRT fills that role. Many of our members are embedded in the market,” he notes.

But he credits the IACPM with “really becoming effective” in the SRT space when the association started collecting transaction data. “We started collecting SRT data because there was no information available elsewhere for this private market. We felt that data would be useful to both regulators and to our members. Increased transparency is helpful for the whole market and being an association is advantageous in this sense because we represent neutral ground.”

Indeed, Leung believes that there is a direct link between the IACPM sharing an expanded set of its SRT data with the EBA and the EBA’s recommendation in 2019 to extend the STS framework to SRT transactions. “The EBA had concerns over the performance of the underlying asset pools in on-balance sheet securitisations; in particular, whether the assets would be cherry picked. But our data demonstrated that it’s the opposite case: SRT portfolios represent banks’ core books of business and it's in the interests of both issuers and investors that the pools perform as expected. As such, SRT deals are completely different to the arbitrage synthetics seen pre-financial crisis, because the interests of both issuers and investors are much better aligned,” he observes.

The IACPM’s collaborative relationship with the EBA has continued since, with the two organisations meeting on an annual basis. Additionally, the association regularly meets with the European Commission, the UK PRA and the US regulatory agencies.

Regarding the US SRT market, Leung says the sector is at present beset by “headwinds” – not least due to political issues around the Basel 3 Endgame and the presidential election in November. “Unfortunately, it is a difficult time in which to try to finalise a very technical piece of regulation,” he adds.

The IACPM operates an annual planning process, whereby the board sets its priorities based on member feedback. One recent outcome of such feedback was the introduction last year of regulator-investor roundtables, which were widely acclaimed by the SRT industry.

“We find that a lot can be achieved when there is better understanding and less of an adversarial attitude between the industry and global regulators. There is always some area of common ground to be found, as both sides want the financial industry to thrive. If a disaster like the GFC were to occur again, it would be no good for anyone,” Leung observes.

One theme that is high on the IACPM’s to-do list is the current regulatory treatment of unfunded SRT, which isn’t properly recognised in Europe and not recognised at all in the US. “To treat an insurer in the same way as a corporate doesn’t take into account the positive characteristics about insurance policies – such as the fact that the liabilities are senior in the waterfall – or the fact that insurers are regulated financial institutions, very diversified and highly rated. To me, it seems an overly conservative approach, especially when the broader utility of SRT is to help banks increase lending to the real economy,” argues Leung.

Tamar Joulia-Paris, senior advisor at the IACPM, agrees that effective and proportionate securitisation frameworks can scale up risk sharing between a growing variety of lenders, investors and insurers, and create sound economies for the future. “Risk sharing is a long-term journey. Securitisation, when undertaken properly, can facilitate economic and social development without creating financial instability, and attract more talent and financial resources to support the green and digital transition. Securitisation is also a global, cross-border product, so it’s important that there is harmony across the market and stakeholders’ incentives,” she notes.

With that in mind, the IACPM is currently engaged in a conversation with its members about terminology, with the aim of settling on an appropriate moniker for SRT. “Consistency of terminology would be helpful in terms of creating a uniform understanding and articulation of what the industry is trying to achieve with SRT. What is the purpose of SRT? At the end of the day, it’s all about risk transfer, but we also need a single definition for market harmony, and ‘Significant Risk Transfer’ is already defined in some existing regulations,” Joulia-Paris concludes.

For the full list of winners and honourable mentions in this year’s SCI Capital Relief Trades Awards, click here.

Asset-Backed Finance

Yield-seekers' paradise

Esoteric ABS set to shine amid stable rates and digital surge, say Miami speakers

Esoteric ABS issuance has surged to represent nearly a third of the US securitisation market so far this year, reaching US$96bn of cumulative volume. At Invisso’s ABS East conference in Miami last week, panellists forecasted strong growth across niche asset classes through 2025 - with anticipated interest rate stability pushing investors towards the digital infrastructure, whole business securitisation (WBS), music IP royalty, C-PACE, private credit and litigation finance segments.

“In an environment where risk assets have rallied and investment grade spreads are now tighter than pre-Covid levels, fixed income investors who want to outperform have to work harder,” said Cory Wishengrad, head of fixed income and senior md at Guggenheim Securities. “By opting for these less-trafficked asset classes, investors can achieve attractive risk-adjusted returns without compromising asset quality.”

The additional diligence required in esoteric transactions can enhance their risk-return proposition to investors, albeit sometimes at the cost of liquidity. With demand soaring due to advances in AI and cloud technology, digital infrastructure assets - like data centres and fibre networks - have become prime targets for investors seeking high yields.

“Digital infrastructure will be a key focus in 2025,” said Yezdan Badrakhan, md and head of esoteric ABS at MUFG. “Beyond data centres, fibre networks and adjacent assets are also gaining traction, as you think of AI’s applicability.”

A peculiarity of data centres and other esoteric ABS asset classes - including WBS and music IP royalties - is that senior tranches rarely receive triple-A ratings, unlike traditional MBS, ABS and CLOs. “Because of their niche nature, rating agencies typically cap the rating in the single-A or triple-B territory - and yet, you can earn spreads with a two handle, often outpacing corporates by well over 100bp,” noted Wishengrad.

Recent updates from Morningstar DBRS and Moody’s may soon allow triple-A ratings for data centre ABS, potentially boosting their attractiveness - though limited data transparency remains a challenge in assessing key metrics like power usage effectiveness (PUE). As demand grows, panellists predicted an expansion of data centre ABS beyond the US, with increased issuance likely in the UK and Europe (SCI 2 October).

Fibre ABS has also gained traction amid shifts to remote work and different AI applications. “You've seen a few major joint ventures announced between large telecom companies and asset managers partnering to extend fibre into underserved areas,” said Charlie Dann, director at Truist Securities. However, he cautioned that assessing operator performance remains critical and a major challenge to mitigating default risk in fibre ABS transactions. 

Meanwhile, litigation finance and private credit are reshaping asset-backed lending as demand for private placements and securitisations grows. Institutional investors are increasingly using third-party insurance to manage credit risk, particularly in these deals.

“We’ve seen much more use of third-party insurance to help shape transactions, creating opportunities for investors to participate in asset classes where they otherwise wouldn’t. For instance, in litigation finance, we see a mix of rated, private and warehousing options catering to diverse investment needs,” explained Douglas Lipton, senior md at GreensLedge Capital Markets.

Beyond litigation finance, clean energy financing through C-PACE is another high-growth area capturing investor interest, according to Matt Nemeth, partner at Paul Hastings. “Litigation finance is definitely broadening, but C-PACE is where we're seeing heightened attention,” he said.

WBS are also drawing attention, with sustained transaction volumes anticipated into 2025. "It's fascinating to see that even an asset class like whole business securitisations continues to drive the majority of transactions," said Wishengrad, adding, "In our most recent deal – the Bojangles transaction – which printed just a couple of weeks ago, we were able to bring new investors to this asset class.”

In the recent US$625m securitisation, Guggenheim served as sole structuring advisor and sole bookrunning manager to US fast food chain Bojangles’ Restaurants. The deal is an example of the growing interest from retail, fitness and restaurant sectors in utilising WBS to fund growth.

“I think there'll be continued strong activity in WBS going into next year, but it's really across the board. It's a combination of the strong overall collateral performance, the senior nature, the capital structure - notwithstanding the single-layer triple-B rating - and the attractive spread profile of these sectors,” observed Wishengrad.

Finally, music IP royalties - driven by the steady growth of streaming revenues - are increasingly seen as “a reliable, non-correlated asset-class,” according to Beth Starr, md and head of ABS syndicate at Truist Securities.

“Streaming has transformed the music IP space, making income streams more measurable and transparent than ever before,” said Starr. “When I speak with originators, they’re approaching it like any robust business – calculating decay rates and valuing assets to optimise revenue.”

Starr, a veteran in traditional asset classes like auto loans and credit cards, expressed enthusiasm for the music IP market. “It’s definitely an area that’s growing, even if it’s not entirely new – we saw the early beginnings with Bowie Bonds back in 1997,” she said, before sharing her appreciation for their relative value, supported by strong sponsorship within longer-duration assets.

Marta Canini

Asset-Backed Finance

C-PACE 'the winner'

Growing institutional interest, new market frontiers and legislative updates steal the spotlight in Miami

With R-PACE uptake cooling across the US, industry leaders hailed C-PACE as “the winner” at Invisso’s ABS East conference in Miami last week. Panellists referenced a surge in deal volume, new market applications and a wave of institutional backing seen throughout 2024.

“We're seeing increased traction in larger C-PACE deals ranging above US$100m, where institutional investors use C-PACE at scale for major metropolitan assets,” said Laura Laumont, md and head of capital markets at Nuveen Green Capital. “This uptick in high-value single-asset, single-borrower transactions reflects a maturing asset class and a trend we expect to continue.”

Mansoor Ghori, ceo and co-founder of Petros PACE Finance, echoed this sentiment, observing that the entry of more sophisticated investors signals the sector’s evolution, driven by its stability and low delinquency rates. “Historically, PACE has been a middle-market product for deals of US$100m or less, but in recent years, we’re seeing deals reaching over US$200m,” he said. “I suspect that you’ll see deals over US$300m over the next quarter or so. More sophisticated players are engaging with PACE, which is great for the market.”

C-PACE is growing not just in volume, but also in terms of diversification, with new products such as condo and micro rural PACE entering the market. "We’ve created a new product line that leverages C-PACE for condo projects – condo PACE – which could grow significantly," explained Ghori. "We’re also seeing colleagues working on micro rural projects in remote areas with strong demand drivers, such as resorts. These innovations expand the use of C-PACE in ways that will drive future growth."

Alongside these expansions, deal structures are evolving to cater to different investor profiles and risk appetites, with 144A issuances and mezzanine financing becoming more common. "Private activity remains significant and mezzanine financing over the last 12 to 18 months has allowed originators to borrow against existing portfolios. This flexibility is creating new opportunities in C-PACE,” noted Evan Roth, md at Guggenheim Securities.

Another development discussed in Miami was the recent IRS’s private letter ruling, which states that C-PACE assessments qualify as ‘qualified mortgage loans’, making them eligible to be securitised within Real Estate Mortgage Investment Conduits (REMICs) (SCI 26 September). Jay Williams, partner at DLA Piper, described the ruling as a step which “opens up the door to securitisations, but doesn't answer all the questions.”

“The first caveat is that a private letter ruling means the only person entitled to rely on it is the addressee,” observed Williams. “The other thing that’s important to keep in mind is that it doesn't solve all the tax issues related to mortgages, including taxable mortgage pools.”

“Essentially, according to the ruling, REMICs can be used to securitise C-PACE assessments, but not C-PACE bonds, because they are not principally secured by interest in real property. They're obligations secured by interests in real property,” explained Williams.

“From an issuer perspective, it’s an interesting ruling because it can help us create really efficient structures where we're not having to pay investors pro-rata and do it more sequentially. This can open up doors with many new investor groups and overall lower the cost of funds for us,” rebutted Ghori.

While the C-PACE legislative landscape shows some momentum, regulatory friction remains a challenge, especially in states like New York. Earlier this summer, NYSERDA, the government authority responsible for setting rules around C-PACE, updated its guidance, lifting the savings-to-investment ratio (SIR) requirement for new constructions, major renovations and select electric systems, arguably easing programme originations. Under the new guidance, C-PACE can also be used to help finance eligible improvements to buildings under long-term ground leases in New York City.

However, several regulatory challenges remain to be addressed. According to Susan Morth, ceo of EIC PACE, NYSERDA’s updates were designed primarily to align C-PACE programmes with the upcoming CLCPA 2025 (Climate Leadership and Community Protection Act), rather than to make programmes more accessible.

“The scope of work and the purpose for those changes to the NYSERDA guidance were to bring PACE in compliance with the CLCPA. It didn’t have anything to do with making C-PACE easier,” said Morth.

In addition, the updated guidance - New York State assembly bill A7631/S5974 - is pending NY governor Kathy Hochul’s approval.

“Whether the governor signs off on this or not remains to be seen. I don't think she will. Congestion pricing should have been a tip-off, but that’s just my personal opinion,” Morth observed.

Further, NYSERDA’s management of the programme adds administrative burdens that, according to Morth, hamper growth. “NYSERDA holds power, but hasn’t effectively clarified what qualifies for PACE. Government money is in the way of C-PACE,” she added, pointing out that public initiatives often overlap with, and even delay, private-sector C-PACE programmes.

Meanwhile, a new trend is emerging globally – at the intersection with the CRE market – marked by increasing collaborations between C-PACE providers and traditional mortgage lenders. A recent partnership between Nuveen Green Capital and global investment group CDPQ Canada exemplifies this direction towards “PACE institutionalisation.”

“We’re looking to undertake around US$600m in combined C-PACE and mortgage financing over the next year, primarily for larger balance C-PACE assets,” said Laumont.

“There have been mortgage originators that later added C-PACE in their product offerings, and I think we're going to see more of that as well,” added Ghori, citing Dwight Capital, a mortgage lender that launched its own C-PACE lending platform, Dwight Green Finance, in July.

Looking ahead, speakers agreed that C-PACE is gaining traction internationally, with Canada and Europe emerging as particularly promising jurisdictions, potentially ripe for C-PACE’s application.

Marta Canini

CLOs

Tried and true

Michelle Manuel and Michael Schewitz, portfolio managers at Investec, answer SCI's questions

Q: What do you look for in a CLO manager?
Michelle Manuel: With a 70% US middle market portfolio, we tend to look for managers who we know have been through a number of credit cycles. When we look at Europe, we choose managers we know or are comfortable with. However, we mainly tend to buy in Europe when the market dislocates. By dislocate, I mean events in the market lead to either the triple-As selling in the secondary at a discount or the market itself just being wide.

Michael Schewitz: If a manager claims to be focused on large middle-market loans but then suddenly purchases a loan with a US$10m EBITDA, which is characteristic of small middle-market loans, that's a red flag for us. Additionally, it's important to ask whether a manager manages solely for equity or considers the entire capital structure. Some managers will indicate that they focus on equity, believing that rating agencies and the deal structure protect the debt. However, having a manager who is also mindful of the debt stack is always preferable.

Q: Do you seek managers with a long-term strategy or focused on daily operations?
Manuel: I believe that the long-term strategy focuses on how managers operate. They need to remain true to their strengths whilst also having the flexibility to adapt to different markets. That flexibility is crucial, as they will experience various market cycles. We are looking for managers who don't take excessive risks during positive market conditions but stick to their regular approach. Their past performance indicates that they can effectively navigate negative market conditions. This is what we've generally found in our portfolio.

Schewitz: If you're considering management with depth, it's worth considering what a manager will be doing in 10 years. While that future perspective is important, most CLOs typically operate with about a five-year focus so that is the immediate concern when investing in any particular transaction. From our perspective as a value investor, we do not need a manager to issue every quarter. If a manager approaches us and indicates they will issue opportunistically and maybe sporadically – without a grand plan – we are generally happy to buy if they are a good, well-resourced manager. Unlike some bigger investors, we do not need managers to be issuing every quarter for us to invest in their transactions, although we also buy liquid managers, particularly in downturns.

Q: What are the biggest challenges in the CLO market, especially given the macro headwinds from the current rate-cut environment? What insights do you have regarding CLOs in this context?
Schewitz: We’re concerned by the impact of regulation on the CLO market. Since it involves securitisation instruments, regulators are only now becoming more comfortable with them. However, the regulations can be very inconsistent. For example, consider the capital requirements for a single-A-rated tranche of a CLO. To my knowledge, there have been very few defaulted A-rated tranches of standard loan CLOs even during the great financial crisis and none for CLO 2.0 so far.

Interestingly, the capital banks are required to hold against an A-rated CLO is equivalent to that of a B-rated loan. B-rated bonds and loans default quite often; that's their nature, and there have been many defaults in B-rated collateral. To my mind, requiring about the same level of capital for both an A-rated CLO and a B-rated loan is quite challenging.

Additionally, the current tightness in the loan market is also a concern. Loan issuance is probably a challenge for both US and European CLO. Without sufficient new loans, there are not enough basic “raw materials” to support deals. This situation feeds into broader macroeconomic narratives. Growing economies have thriving companies, which in turn issue debt. Effective financial structures make this debt more efficient. However, if economies stagnate and companies are not issuing debt, the CLO market is impaired. From a macroeconomic perspective, one significant risk — especially in Europe — is the lack of growth. 

Q: Would you say that current regulation limits investment in CLOs?
Manuel: I would say no. However, there is always a risk of regulatory overhang; an extreme and seemingly unlikely example would be regulators deciding it is no longer desirable for banks to be long term holders of triple-As. On a more positive note, the implementation of proposed changes is generally not rapid and market participants have become very actively vocal when proposed regulatory changes could lead to adverse outcomes in both the structured credit markets and those beyond structured credit which may also be impacted.

Anything that affects investors' interest in sellers is a challenge, whether it's regulation or changing interest rates. Ultimately investors will choose to allocate their funds to where they can get the best reward for the risk they are taking given the cost of their capital and this may not always result in CLOs being the attractive investable asset class as they are currently.

Schewitz: Current regulations steer investment in CLOs, and they may also impose limits. Retail investors can now access CLOs through ETFs, allowing them to invest in a pool of CLOs rather than an individual CLO. However, this process took considerable time to develop. There are still several issues to address in Europe, but ETFs are becoming more common. Regulation plays a crucial role in shaping investment strategies, and this influence extends, for example, to how insurance companies operate under the solvency 2 regime. Regulation, therefore, is essential in guiding investment decisions. 

Q: What are your expectations for the CLO market in future?
Manuel: Looking ahead, I don’t foresee significant upward pressure on spreads. Currently, they appear to be well supported at this level. Unless something drastic occurs, I believe they will remain in the current range or even a tad lower, although it is difficult to envision spreads tightening given the large supply market participants are expecting. 

The US market appears to be operating at a somewhat normalised scale despite facing similar challenges in lower loan origination as Europe has been facing. Both markets however appear optimistic that a pickup in M&A activity driven by lower rates will be supportive of an increased future issuance.

By all accounts we have been led to believe there is likely to be a surge in supply in a run up to the US elections. If I had to estimate, given the robust investor appetite to date, I would say that there will still be opportunities for issuance after the election in the run up to the year-end slow down.

Camilla Vitanza

Structured Finance

Job swaps weekly: Linklaters lures four A&O Shearman partners

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Linklaters hiring four partners from A&O Shearman for its New York office. Elsewhere, the Prytania Solutions team has joined Houlihan Lokey’s structured products valuation advisory team as part of the latter’s acquisition of the former, while Danske Bank has snapped up a former senior Nordea executive as investment director.

Linklaters has appointed four longstanding A&O Shearman partners – David Lucking, John Hwang, Derek Poon and Dan Guyder – as partners in its New York office, focusing on derivatives, securitisation and restructuring. The move is part of Linklaters ongoing efforts to build out its senior US team and follows the appointments of partners in its M&A team, US capital solutions and special situations team, and its international arbitration team.

Lucking focuses on derivatives and structured finance transactions, in addition to significant risk transfer transactions. He leaves his role as partner at A&O Shearman after 24 years – most of which at Allen & Overy, prior to the firm’s merger with Shearman & Sterling six months ago (SCI 12 April).

Hwang and Poon led the Chambers-ranked US asset finance and securitisation practice at A&O Shearman. Their expertise spans a range of structures and asset classes ranging from traditional consumer and commercial asset securitisations to esoteric digital infrastructure, renewables and aviation financings. Hwang was with A&O Shearman for 14 years while Poon spent 12 years with the firm.

Guyder’s practice focuses on out-of-court restructurings, bankruptcy cases and cross-border insolvency proceedings. He joined Allen & Overy in 2003 after spells at Dewey & LeBoeuf and Milbank.

Meanwhile, the Prytania Solutions Ltd (PSL) team – led by ceo Fraser Malcolm and chief technology officer James Wright – has joined the structured products valuation advisory team within Houlihan Lokey’s portfolio valuation and fund advisory services practice, following Houlihan Lokey’s acquisition of PSL. 

The acquisition connects PSL’s advanced machine learning technology and market-leading tools with Houlihan Lokey’s structured products valuation clients, further enhancing the capabilities and global reach of the firm’s portfolio valuation and fund advisory services practice. In addition, the acquisition expands the European presence of the financial and valuation advisory business and represents a significant step in monetising data insights to serve clients’ evolving needs. 

Founded in 2016 after a spin-out from Prytania Investment Advisors, London-based PSL specialises in structured credit valuations and analytics, with an emphasis on quantitative analysis and machine learning.

Jacob Toft Hansen has joined Danske Bank as an investment director, based in Copenhagen. He was previously chief portfolio manager, alternatives and credit at Nordea, where he managed three CLO mandates and a risk retention fund, among other investments.

Katrina Niehaus has joined Evercore to lead its structured finance practice. Based in New York, Niehaus will serve as a senior md and will focus on offering capital solutions through private ABS and asset finance. Niehaus brings more than 20 years of structured finance experience to Evercore, and joins the firm from Goldman Sachs where she led its corporate structured finance business.

Apollo has appointed Murad Khaled as md, capital solutions and origination. Khaled joins the firm from Bank of America, where he served as md, head of EMEA leveraged finance capital markets for six years. Prior to this, he was executive director of European private credit investments at HPS Investment Partners for four years, and earlier held a seven-year tenure as executive director in leveraged finance origination at JP Morgan, beginning in February 2007. Based in London, Khaled will focus on growing Apollo’s origination and capital solutions across Europe.

AlbaCore has appointed Luke Gillam as its new head of senior direct lending. The structured finance veteran joins the group as partner from Goldman Sachs where he was head of EMEA credit capital markets and co-chair of its credit capital market committee. Gillam will lead the senior direct lending team and on the sourcing, underwriting and execution of senior direct lending transactions alongside Bill Ammons.

And finally, White & Case has recruited Thomas Göttel to join its structured finance team in both Paris and Frankfurt as a legal intern. Göttel has interned on the capital markets teams of multiple major law firms, including Clifford Chance and DLA Piper.

Kenny Wastell, Corinne Smith, Claudia Lewis, Marta Canini