Contents

CLOs

US CLO equity IRRs show minimal divergence across strategies

Poh-Heng Tan from CLO Research provides analysis on US CLO equity IRR – hold to maturity vs sale

Against the backdrop of a strong loan market, elevated loan prices and ongoing repricing activity, many seasoned deals have been called in recent months. This study reviews a sample of 10 recently called US BSL CLOs.

The equity tranches of these CLOs had previously appeared on BWIC, and the analysis considers how primary equity investors would have fared had they sold their holdings in the secondary market compared with holding them to maturity, i.e. until full redemption.

The estimated final IRR (third column) shows the equity IRR for primary investors, based on an assumed issue price of $95. The fourth column reflects the IRR had the equity tranche been sold on the most recent relevant BWIC date (source: SCI), while the final column indicates market conditions, proxied by the bid prices of the Morningstar LSTA US B/BB Ratings Loan Index.

Interestingly, the final equity IRRs are broadly in line with those implied by a secondary sale. On average, the estimated final IRR is 6.4% versus 6.6% if sold.  

Although the sample size is relatively small, sale-based IRRs appear useful in indicating deal performance ahead of eventual redemption, particularly where a deal has been outstanding for a considerable period and market conditions are relatively stable.

Among the recently liquidated deals, those managed by CIFC and Carlyle—such as CIFC 2013-1A SUB, CIFC 2015-1A SUB, and CGMS 2013-1A SUB—stood out with IRRs ranging from 12.8% to 15.2%.

Source: SCI, CLO Research

Asset-Backed Finance

Recreational finance: why Octane is betting big on forward-flow

Octane doubles down on ABF as institutional appetite for powersports, RV and marine receivables heats up

When Octane announced its US$300m forward flow deal with Moore Capital Management’s specialty credit platform last month, it marked the firm’s third such transaction in 2025 and fourth to date, highlighting how central forward flow has become in its growth strategy.

“Forward-flow gives us liquidity and flexibility,” explains Nicholas Makarov, Octane’s head of capital markets.

He continues: “Liquidity, because we can use regular loan sales to turbocharge our originations; and flexibility, because we can sell ongoing batches of loans and adjust the mix of what we’re selling over time. With securitisations, we monitor market conditions closely, but the strength we’ve had in establishing our forward-flow programme means we have the luxury to look across both public and private markets.”

This year alone, Octane has inked a US$700m forward-flow deal with New York Life, MetLife Investment Management and Equitable in April, as well as a forward-flow agreement with Georgia’s Own Credit Union in January. This summer, the firm surpassed US$6bn in aggregate originations, just seven months after reaching the US$5bn milestone.

Octane has architected a funding strategy that blends forward flow agreements, securitisations and whole-loan sales, as well as warehouse facilities – a mix that allows the lending platform to continue growing without overreliance on any one channel.

“We never want to be overly dependent on a single partner or market window,” notes Makarov. “Diversification is what lets us grow responsibly.”

That approach has helped Octane establish relationships with a diverse range of investors, including credit unions, insurers and hedge funds.

“Given our full-spectrum origination programme, we can tailor each forward-flow programme to match the needs of individual partners. Our number one priority is to ensure that each partner’s needs are met, while continually evaluating Octane’s own growth to determine if it makes sense to bring on new partners - and, given the demand for our assets, we’re fortunate to always have a pipeline of potential new relationships.”

Why forward flow matters

Forward flow agreements are one of Octane’s sharpest competitive tools. Rather than selling loans in one-off transactions or waiting for securitisation markets to be favourable, forward flow allows Octane to sell loans on a rolling basis under pre-agreed terms, giving it predictable liquidity and a steadier growth trajectory.

“The strength of our programme is that it doesn’t require big strategic shifts based on market uncertainty,” says Makarov. “All these tools - forward flow, securitisations, whole-loan sales - give us multiple legs to stand on. Forward-flow is just the latest piece that solidifies our capital markets programme, and it’s a meaningful milestone in our evolution.”

The Moore deal signals growing institutional interest in powersports receivables as a legitimate and scalable asset class. Makarov notes that investor demand has been broadening, particularly following Octane’s RV and marine securitisation in December 2024, the company’s first transaction involving these growing asset classes.

“Folks are obviously very familiar with our powersports offering, but there’s also been really strong demand for our RV and marine receivables, particularly after our December 2024 securitisation. At this point, people are just excited to see what comes next from our team.”

According to Fortune Business Insights, the global powersports market size was valued at roughly US$36bn in 2022 and is projected to grow from US$38bn in 2023 to US$55bn by 2030, with a CAGR of 5.4% over the period.

Looking ahead, Makarov says that Octane’s capital markets team is ready to keep innovating. “Our job is to stay ahead of the curve, so that no matter where markets go, Octane has the funding flexibility to keep delivering for our dealers, OEMs and customers.”

Marta Canini

Asset-Backed Finance

Prime time for European private credit

Transparency concerns mount as Europe's ABF market tipped to overtake the US

Asset-Backed Finance

SCI in Focus: ABF's data dilemma – Part 1

The first instalment of a two-part series on the ABF data landscape examines how the growth of the market is outpacing its infrastructure

Capital Relief Trades

SCI webinar: Growing role for CRT by US regionals

CRT usage and variety on the rise, say panellists

US regional banks continue to make use of CRT transactions as an improved regulatory framework, more varied reference assets and innovative solutions pave the way for greater volumes, say market experts.

Last week’s SCI webinar, ‘From Niche to Necessity: CRT’s Growing Role in US Regional Banking’, highlighted how the space is shifting from a niche strategy to a more mainstream tool.

Speakers noted that the notorious Basel III Endgame (B3E) is now unlikely to increase capital requirements, but CRT remains a valuable tool for optimising balance sheets in a competitive global scenario.

However, they also said that the current regulatory framework contains inefficiencies and inconsistencies.

De-concentration of risk has been particularly beneficial in recent commercial real estate (CRE) deals. This is a key asset in many regional portfolios and the capacity to reduce risk concentration was shown fully in the Third Coast deal earlier this year.

Building on the discussion of which portfolios work best with CRT, speakers emphasised that, ultimately, “Banks tend to favour the asset classes they want to grow in.” However, they also pointed out that the most homogeneous assets – such as auto or corporate loans – are easier for banks to place, are more efficient, quicker, and cheaper to manage.

Innovation, while the US is still in an “adoption stage” and bearing in mind recent concerns from regulators, must, panellists stressed, be carried out “in a responsible manner, without tolerance for increased leverage or systemic risk.”

The Merchants Bank healthcare CRE deal represented an important innovation in the space both from issuer and investor standpoint, as a bespoke structure was used to manage specialised assets and ensure risks were clearly understood by investors.

 Alternatively, Pinnacle Bank’s 2024 deal transferred risk on US$1.7bn of residential mortgages through a CDS structure delivering targeted capital relief. Such transactions, according to panellists, reflect ongoing innovation in the space.

Investor appetite for CRTs remains strong, with certain investors proving better suited to engage with regional banks through specialised funds – as with EJF, sources point out. Panellists emphasised that “Investor appetite remains out there,” pointing to a pool of hedge funds, asset managers and PE firms holding undeployed capital.

A mix of hesitation remains among issuers, especially regarding the ideal time to tap into the CRT space. Sources, however, pointed out that “CRTs are likely to remain part of the toolkit for managing balance sheets.”

Looking ahead, speakers highlighted regulatory harmonisation and clarity as central requirements for the sector’s growth. Aligning capital rules would give regional banks similar risk transfer tools as Fannie Mae, Freddie Mac and the GSIBs, while clearer regulatory guidance would provide the certainty banks need to plan effectively.

This discussion sets the stage for SCI's upcoming US Regional Bank CRT Forum in New York on Wednesday 10th of September.

Dina Zelaya

Capital Relief Trades

NA bank with Q3 CRT deal

Top ten bank in the market with IG corporates deal

US Bank, the seventh largest bank in the US, is said to be in the market with a CRT deal referencing a US$5bn pool of investment grade corporate assets, arranged in-house by US Bancorp.

There is a retained tranche comprising 87.5% of the deal, and a 12.5% first loss position divided into five separate tranches for a total of US$625m.

At the top of the stack is a US$380m B1/B2 fixed rate, floating rate tranche which will be priced over the interpolated curve and SOFR, and is rated low AA by DBRS. Current indicative pricing suggests mid 100bp over both SOFR and the curve.

This is followed by a US$55m C tranche floater, rated A, which will be priced over SOFR in the high 100bp.

The US$50m D tranche, also a floater to be priced over SOFR, will be offered in the mid 200bp area and is rated BBB.

Below this comes a US$40m E floating rate tranche, rated BB, which will come in at about 400bp over SOFR, and, at the bottom of the stack, there is an unrated US$100m R tranche which will price in the 700bp over area.

The WAL of all tranches is 2.2 years.

US Bank declined to comment.

In addition, a US bank is said to be in the market with a transaction referencing subscription line finance. No further details are available.

Simon Boughey

Capital Relief Trades

Talking point: Higher RWAs on repo?

SRT market update

A recent working paper from the ECB suggests and demonstrates that a bank's true risk extends far beyond its direct and indirect connections, encompassing hidden “higher-order exposures.” These are systemic, cascading risks that can cause widespread losses in a crisis.

“These results suggest that higher-order exposures should inform the design and calibration of those tools in the regulators’ arsenal where exposures matter, including large exposure limits, capital requirements, stress testing and resolution.”

In essence, this quote provides a certain academic justification for supervisors to increase the risk weighting of a bank’s repo book, arguing that its capital is currently calibrated on a dangerously incomplete understanding of its true, interconnected risk.

Typically and simplistically, in a repo transaction, a bank receives collateral and lends cash. Furthermore, the value of this collateral is a primary input into the bank’s RWA calculation. 

However, the ECB paper shows that a crisis-driven fire sale—caused by a “higher-order” counterparty a bank doesn't even know it's exposed to—can cause the value of this collateral to plummet, leading to significant, unexpected losses.

In other words - from an SRT perspective - the originator bank (the one using the repo market) does not just transfer the risk of its direct counterparty defaulting; it's also connected to a broader, interconnected web of risks. 

While still a conceptual proposition, the originator's retained risk could be amplified by higher-order exposures originating from the transferred portion, making the initial risk transfer less effective in a systemic stress scenario.

The study found that higher-order exposures can account for more than half of the total exposure, especially during a crisis. This suggests that the current RWAs for SRT repo, which don't account for these complex linkages, are too low.

Commenting on this discussion, one SRT investor concludes: “Recently the repo market for SRTs has developed and certain providers have been very aggressive in terms of haircuts and asset selections. Therefore it can be argued that systemic risk has increased."

Vincent Nadeau

Capital Relief Trades

Clean-up call language deters CRT

Restrictions on exercise of calls scares off issuers

Current US regulations regarding clean-up calls are so narrowly defined that they constitute a significant barrier to extension of the CRT market, but the market is unlikely to receive relief in the foreseeable future, say market experts. 

Virtually all CRT deals currently incorporate clean-up call language, but the conditions under which those calls can be exercised are tightly restricted.

According to the Federal Code of Regulations (FCR), capital relief from a CRT transaction will only be recognized if clean-up calls are limited to so-called eligible clean-up calls. This means a call which can be exercised only if 10% or less of the outstanding principal is left to be paid out.

But this means a bank cannot include clean-up calls for any amounts greater than 10%, or, for example, if the tax code experiences a significant change during the life of the bond, or if regulations are modified so capital relief would no longer be granted.

If all of these cases, the existence of clean-up calls is an appreciable benefit to banks, and issuers – particularly those that might be new to CRTs  – don’t want to be without them.

“You can see from the bank’s perspective, they’re tying themselves to this deal, even if something really bad happens, even if they lose capital relief. This is a big deterrent to expanding CRT to new asset classes, and new banks,” says Matt Bisanz, a partner at Mayer Brown and a leading expert on bank regulation.

A synthetic securitization of, say, a residential mortgage might have a 30-year life. This is a long time to hold an exposure hoping that nothing changes to alter its status.  

As Title 12, Chapter 2, Part 217.41 of the FCR states, “A Board-regulated institution that transfers exposures it has originated or purchased to a securitization SPE or other third party in connection with a traditional securitization may exclude the exposures from the calculation of its risk-weighted assets only if each condition in this section is satisfied.”

One of the four following conditions is: “Any clean-up calls relating to the securitization are eligible clean-up calls.”

If any condition is not met, the institution “must hold risk-based capital against the transferred exposures as if they had not been securitized and must deduct from common equity tier 1 capital any after-tax gain-on-sale resulting from the transaction.”

This stipulation is especially unattractive to smaller regional banks which are newcomers to the capital relief sector. “If you’re JP Morgan you’re sophisticated enough to manage this but if you’re First National Bank of Idaho you’ll be more hesitant,” says Bisanz.

Unfortunately, it seems to market watchers that any changes to these conditions is low down the list of regulatory priorities. Securitization market professionals were hoping that a new broom and new heads of the agencies this year would usher in a relaxation of the rules, but the sad truth is that the structured credit does not loom as large to regulators as doubtless it should.

The CRT market will have to live with this definition of clean-up calls for some time yet.

Simon Boughey

Structured Finance

Job swaps weekly: Rithm to acquire Crestline

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Rithm Capital agreeing to acquire Crestline Management. Elsewhere, Beach Point Capital Management has appointed a former co-managing partner and head of credit at TPG Angelo Gordon as president and chief investment officer, while Nuveen Private Capital has announced a strategic partnership with Hunter Point Capital and Temasek. 

Rithm Capital is set to acquire Crestline Management, underscoring the firm’s long-term strategy to build a global, diversified asset management platform focused on delivering alpha for investors and value for shareholders. The acquisition meaningfully expands Rithm’s capabilities across direct lending, fund liquidity solutions, insurance and reinsurance – adding to its existing strengths in asset-based finance, real estate, structured and corporate credit, and energy and infrastructure.

Rithm’s combined platform, including Crestline and Sculptor, will be comprised of US$98bn in investable assets, consisting of US$45bn of assets on balance sheet and approximately US$53bn in assets under management. It offers institutional investors a broad suite of innovative strategies across asset classes and return profiles, supported by over 200 seasoned investment professionals.

Upon closing of the transaction, Crestline’s investment team, committees and strategies will remain unchanged, and the firm will maintain its existing offices in Fort Worth, New York, Toronto, Tokyo and London. The transaction is expected to close in 4Q25, subject to customary regulatory approvals and closing conditions.

Meanwhile, Beach Point Capital Management has hired Josh Baumgarten as president and chief investment officer and Eric Storch as global head of client partnerships and business development. Both will be based in Beach Point’s New York office.

Baumgarten leaves his role as co-managing partner and head of credit at TPG Angelo Gordon after eight years with the firm, having previously worked at Blackstone and Blackrock. He will join Beach Point's executive committee and work across private credit, liquid credit & CLOs, multi-asset credit, structured credit and asset-backed finance.

Storch joins Beach Point from Oak Hill Advisors, where he was md and served for 13 years. He previously worked at Blackstone and Seix Advisors. He will lead investor relations, capital formation, and product development for the firm.

Nuveen Private Capital has entered into a strategic partnership with Hunter Point Capital (HPC) and Temasek. HPC and Temasek are making minority investments in Nuveen Private Capital and Temasek will provide long-term capital commitments to the platform's new and existing strategies.

Nuveen Private Capital was formed in March 2023, following Nuveen's majority acquisition of Arcmont, which – in combination with Churchill Asset Management – created an US$87bn private capital platform. Over the past year, Nuveen Private Capital has invested over US$21bn in over 400 companies in support of US and European private equity firms and currently serves more than 5,000 investors globally.

Following the transaction, Nuveen will maintain its majority ownership of Nuveen Private Capital, with Churchill and Arcmont senior management and employees retaining minority stakes. The transaction will have no impact on Nuveen Private Capital's investment strategy or processes, leadership or day-to-day operations.

Kirkland & Ellis has recruited Lindsay Trapp as a partner in the investment funds and structured finance & structured private credit practice groups. Trapp advises global private fund sponsors on setting up and managing complex credit funds and insurance-related solutions.

Her work includes fund structuring, compliance and distribution, with extensive experience in rated funds, CFOs and other capital-efficient investment structures. She also counsels clients on captive CLO equity funds with EU risk retention-compliant managers, levered private funds that use captive CLOs, evergreen/semi-liquid funds for illiquid assets, liquid multi-credit funds and funds of closed-end funds.

Based in New York, Trapp was previously a partner with Dechert.

Art Capital has recruited AJ Storton as a partner, tasked with establishing and leading Art Capital Structured Finance (ACSF), the first dedicated real estate back leverage advisory service in Europe. The group plans to expand into broader structured finance activities in time.

Storton brings more than 15 years of pan-European real estate credit experience to the role. He joins from JPMorgan, where he was executive director and head of EMEA & APAC CRE loan capital markets and EMEA CRE loan-on-loan. Prior to that, he spent six years at Bank of America Merrill Lynch, working across origination, underwriting, syndication and securitisation.

The appointment of Storton as the firm’s fourth partner – alongside Tim Vaughan, Stuart Blieschke and Martin Sheridan – brings its combined senior experience in real estate finance to over 70 years. Art Capital is currently advising on over £3bn in live mandates across the UK and Europe, with £1.5bn in transactions expected to close by the end of 3Q25.

Eversheds Sutherland has hired Latham & Watkins' Martin Corrigan as a structured finance partner in its London office. Corrigan focuses on securitisation and structured finance transactions across multiple European jurisdictions, including public and private, rated and unrated deals. He leaves his position as associate at Latham & Watkins after four and a half years with the firm, having previously worked at Clifford Chance for 15 years.

Nathan Menon has joined Squire Patton Boggs as a director in the financial services practice, based in its London office. He will be working alongside former colleagues Ranajoy Basu in London and Trish O’Donnell in New York to develop the firm’s global structured finance capabilities. Menon was previously a partner at Reed Smith, which he joined in February 2011.

Trustmoore's Sinead Bald has joined CSC as director, relationship management, based in London. She leaves her position as director, business development, capital markets at Trustmoore after two and a half years with the business. Bald previously spent a year and a half at ARC Ratings, during which she focused on structured finance, private credit and CLOs, and seven and a half years at AIG working in structured finance.

​​Ogier has promoted Laura Archange and Constantin Iscru to its Luxembourg partnership. Archange specialises on cross-border fund finance and securitisation transactions, and has a focus on regulatory compliance and innovative structuring. She recently joined the business as counsel in May, having previously spent 12 years at Arendt & Medernach. 

Iscru advises on a range of transation types spanning capital markets financing, securitisation, acquisition financing, restructuring and insolvency, fund finance, real estate and private equity financing, leveraged finance, fintech and blockchain. He joined Ogier in April last year, having previously worked at DLA Piper and Clifford Chance.

Starwood Capital Group has appointed Franco Li svp, asset-based finance & insurance strategies, based in New York. He was previously director, structured products at National Life Group, having worked at Figure, Theorem, Rothesay Asset Management and Credit Agricole before that.

Revolut has recruited Andrew Petersen as head of transaction management, based in London. With a background in CMBS and CRE private credit, his remit is to drive loan execution and risk management across Europe, as part of Revolut’s expansion into CRE lending.

Petersen was previously a partner and head of structured finance at Alston & Bird London, whose London office he founded in August 2019. Before that, he was a finance partner at K&L Gates and a counsel at Dechert.

RBC has hired Paul Laudrin as a structured credit trader, based in London. Laudrin has particular experience in structuring and trading CLNs, as well as SPV repacks. He previously worked in Nomura’s structured credit/securities financing group, which he joined in December 2022, having been at Societe Generale and BNP Paribas before that.

And finally, Rolf Steffens has joined Munich Re as client relationship and risk manager, within the structured portfolio solutions group. Based in Munich, Steffens was previously co-founder and md of digital services platform Cadeia. Before that, he worked at Deutsche Bank, HSBC and Merrill Lynch in securitisation and credit derivatives-related roles.

Corinne Smith, Kenny Wastell