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Asset-Backed Finance

Opportunities eyed in the 'eddies of ABF'

Davidson Kempner favours market's quieter corners for risk-adjusted returns

While direct corporate lending dominates private credit headlines, Davidson Kempner Capital Management argues that investors should look towards quieter corners of the market - the "steady eddies" of ABF. These smaller market segments offer compelling risk-adjusted returns with stronger structural protections than their corporate counterparts, according to the company’s latest white paper, entitled ‘Rapids of private credit: opportunities in the eddies of ABF.’

Davidson Kempner has identified three particularly attractive opportunities in US second-lien residential mortgages, European SME ABL and US mid-ticket equipment finance. Together, these segments represent growth potential in a market the firm sizes at over U$20trn in the US alone, of which only U$2trn is publicly securitised.

"We think we're in the early innings of the transition of some of the ABF market from bank balance sheets to non-bank balance sheets," Suzy Gibbons, partner and head of research at Davidson Kempner, tells SCI.

Second-lien mortgages: the counterintuitive opportunity

According to Gibbons, the most interesting finding is that certain second-lien mortgages can actually be safer than new first-lien mortgages at current rates. This counterintuitive dynamic stems from two powerful forces: unprecedented home price appreciation (up by 56% since 2019) and the legacy of rock-bottom mortgage rates locked in during the pandemic.

"Sometimes a second lien can be safer than a first lien," Gibbons highlights. "If you provided the second lien to the 2019 or the 2021 homeowner, that homeowner has roughly 25% less mortgage interest as a percentage of income, compared to someone taking out a first-lien mortgage today.”

The research shows that a homeowner with a 2021 mortgage at 3.3% who taps US$80,000 in second-lien credit at 8.2% still pays substantially less total mortgage interest than someone with a 2024 first-lien mortgage at 7.3%. Meanwhile, 52% of US homeowners currently hold mortgages with rates below 4%, creating a pool of potential borrowers for whom second-lien products represent the most economical way to access credit.

Gibbons estimates that this market could grow by more than U$2trn, a significant expansion from the current U$590bn market. "We looked at the value of homes in the US, which is approximately US$50trn, and the percentage with a mortgage, which is 60%. So that means there are US$30trn of homes with mortgages in the US. We then back out the existing mortgages, and it shows that the loan to value in the US is 48%, which leaves a cushion for incremental mortgage capacity.”

She continues: “Research shows that 52% of mortgages that exist in the US are below 4%. If that component of the market with the low-rate mortgages were to grow from that 48% to the 65%, let's say a reasonable loan-to-value, that would imply US$2.6trn of additional capacity for second lien mortgages."

Banks' evolving role in this space, driven by regulatory capital requirements that assign 100% risk-weights to second-lien mortgages, has created opportunities for private capital to step in through warehouse lending and forward-flow agreements. "We think we're in the early innings of this market's growth," Gibbons notes, though she cautions that "rates would need to stay in the current context for this to make sense for people."

European SME ABL solutions eyed

In Europe, Davidson Kempner sees opportunity in providing holistic, multi-jurisdictional ABL solutions. The key, according to the paper, is combining term loans with asset-based revolvers while lending across inventory, receivables, property, plant and equipment and cashflow across multiple countries.

"The commonality of the opportunity set is the multi-jurisdiction lending. That's due to the fact that the banks tend to focus within a country because – at times – there are  incremental regulatory charges on lending outside of the bank's jurisdiction,” Gibbons explains, citing the company’s April white paper about the European market.

Such rigidity in the European banking system is creating space for private credit investors. By offering bespoke financing that addresses both working capital needs and growth plans, lenders can provide value to SMEs while securing strong protections through cash control, collateral coverage and advance rates.

"It allows them to work with one lender versus multiple lenders, multiple facilities," Gibbons explains. She also notes that ABL revolvers enable companies to "grow into" their credit facilities without constant renegotiation.

Davidson Kempner shows historical loss data supports the attractiveness of this approach. US asset-based loans have averaged just 0.42% annual charge-offs since 1993, with rates remaining below the long-term average since 2012.

Opportunities in equipment finance

The US mid-ticket equipment finance market, covering assets valued between US$200,000 and US$5m, represents another big opportunity. According to Davidson Kempner’s research, regional banks hold 65% of this market but have moderated origination volumes since 2019, creating space for independent lenders.

"Post-ZIRP, the market actually became quite attractive for creditors because you're seeing higher yields, and yet loss rates continue to be subdued," Gibbons says. Full-year average annual loss rates have remained around 0.5% since 2006, while spreads have increased following interest rate rises in 2022.

The challenge and opportunity lie in origination. “It’s really important to create partnerships with originators through joint ventures because origination is traditionally the advantage that banks and captives have,” she notes.

Gibbons believes the opportunity in this space lies in partnering with high-quality emerging originators, many of whom emerged from regional banks, through joint ventures with strong governance rights and aligned incentives. "We've seen teams start platforms coming from regional banks. We think that's crucial to growing market share in this space,” Gibbons says.

Across the three segments, Davidson Kempner’s analysis suggests that after accounting for expected losses based on historical data, these ABF opportunities could deliver superior risk-adjusted returns compared to direct corporate lending - where spreads of approximately 500bp could be reduced by 35% after losses, versus just 10% for these ABF segments.

Marina Torres

Capital Relief Trades

New SRT asset classes set to emerge in 2026

Expanding issuer base driving elevated activity

Activity in the SRT market has remained elevated through 2025, with issuance becoming more evenly distributed across the year and supporting a broader issuer base. As the market has expanded, so too has the range of asset classes referenced in transactions.

“Overall, SRT activity has remained elevated. 2025 was just as active as 2024, although the activity was more dispersed throughout the year,” says Sara McGinty, partner at Ares Management.

While issuance in prior years was heavily weighted toward the back end of the calendar, McGinty notes that 2025 saw steadier volumes across all four quarters – a shift driven by a growing number of issuing banks. Volumes are expected to reach the same levels as those seen last year, if not a bit higher.

As the market has expanded, so too has the range of asset classes referenced in SRTs, spanning fund finance, auto loans, investment-grade and high-yield corporates, as well as mixed portfolios. “In 2025, we saw a few interesting capital call SRTs, as well as some new asset classes that were introduced into the market. We expect this trend to continue into 2026, with asset classes extending to data centres, equipment financing and broader infrastructure,” McGinty notes.

Data from Ares’ November 2025 white paper shows that corporate loans account for around 36.8% of underlying SRT reference pools, followed by leveraged facilities and loans (19.9%), auto loans (11.5%) and residential mortgages (6.8%).

Structures largely unchanged, but cash SRTs may grow

From a structural perspective, McGinty says the market has remained largely consistent, with SPV-issued CLNs continuing to dominate across transaction types. However, increased participation from regional banks, particularly in the CRE space, could drive greater use of cash SRTs.

“We anticipate the SRT market could start to see more cash SRTs from regional banks, who may use this technology to optimise their CRE risk,” she confirms.

For Ares, flexibility on structure remains key, with investment decisions instead driven by risk and pricing. “Typically, we let the bank dictate what structure is going to work for them. Then we can determine whether it is appropriate for us.”

Europe still larger, but US growth accelerating

Geographically, Europe remains the more established SRT market, though McGinty highlights the notable pace of growth in the US given its relative youth. “While the European SRT market has been around for more than 15 years, the US SRT market has really only existed for two to 2.5 years,” she says.

Despite lower overall volumes, issuance in the US has progressed quickly – a trend McGinty expects to continue into 2026. “In terms of US SRT market volume, the numbers are quite staggering in how quickly the US SRT market has ramped up in such a short period of time. There will likely still be plenty of banks next year that will be first-time issuers,” she notes.

McGinty adds that US SRTs are increasingly used not only for capital relief, but also to support balance-sheet growth and risk distribution across sectors, such as fund finance and digital infrastructure. “Despite the ever-changing expectations around bank regulation, the bottom line is that bank capital is still precious. The evolving business model for banks means that SRTs are increasingly used not only for capital relief, but also to support balance-sheet growth and risk distribution across sectors,” she says.

Ares’ approach: relative value, not a dedicated SRT allocation

When it comes to underwriting and investment criteria, McGinty stresses that Ares does not operate as a dedicated SRT investor. Instead, opportunities are assessed on a relative value basis across credit markets.

“We are a relative value credit investor. There is no dedicated capital or desired percentage of our portfolio to be deployed in SRTs,” she explains.

Ares focuses exclusively on asset classes where it has deep underwriting expertise and avoids blind pool portfolios. “In our due diligence processes, we go line by line through these portfolios,” McGinty observes. “We focus on asset classes where we have deep experience in the underlying asset.”

Transparency remains a key requirement. “Transparency is most important to us – we rely on our ability to underwrite the assets in the portfolio.”

Pricing discipline is equally critical, she adds, noting that Ares has walked away from multiple transactions in 2025. “Recently, pricing has been tight. There have been plenty of transactions we have passed on - not because the risk wasn’t interesting, but because the pricing did not reflect the risk appropriately.”

Looking ahead to 2026, McGinty says selectivity will remain central to Ares’ approach. “We think it is an interesting market that will continue to evolve. We are involved in this market when the risk-adjusted returns make sense relative to other opportunities we are seeing, but we are very cautious of it as well,” she concludes.

Nadezhda Bratanova

CLOs

Double-B CLO BWIC highlights softer trading conditions

Poh-Heng Tan provides insight into this week's US CLO double-B BWIC which highlights a flat-to-softer backdrop

This week saw several US BSL CLO double-B tranches trade with cover DMs ranging from 542 bps to 1,059 bps, corresponding to MVOCs of between 106h and 94h. Overall, recent trading points to a flat to slightly softer tone.

GWOLF 2019-1A DR² saw a cover bid of 729 DM with a 5.86 WAL, which was broadly in line, after adjusting for WAL differences, with non-benchmark levels of 756 DM with a 6.13 WAL and 771 DM with a 6.0 WAL observed in late November and early December, with a reinvestment period ending in 2026 and an MVOC of 103.5–104.4h.

In contrast, WINDR 2017-3A ER received a cover bid of 768 DM with a 6.29 WAL, which was wider than the cover bid of 727 DM with a 6.51 WAL observed for a similarly profiled bond in late November. Both tranches had MVOCs of around 103.1h.

DRSLF 2019-68A ER’s cover bid of 797 DM with a 6.34 WAL was also wider than the 769 DM with a 6.3 WAL observed in late November. Both tranches have MVOCs of around 102.1–102.2h.

Typically, distressed double-B tranches are bid at levels broadly in line with their double-B NAV. However, NCC 2018-IIA E cleared around 10 points below its double-B NAV. The cover bid appears to allow for additional cushion, given that close to 40% of the collateral pool is currently quoted above par, which helps mitigate potential collateral market value downside risk.

Asset-Backed Finance

SCI In Focus: Managers bet on growing LP spotlight for fresh ABF capital

New and established GPs eye different angles to gain edge

As the European ABF market has grown this year, initial capital allocation has unsurprisingly gone to the largest managers. But as the market develops, new entrants hope the spotlight will draw in fresh streams of investors seeking new strategies and approaches.

Although the space has been active with new entrants in 2025, TwentyFour Asset Management sits in a slightly different spot, having been around for over 17 years already. With a primary focus on fixed income and structured credit, its asset-backed finance fund launch earlier this year was its first taste of the private credit market. Targeting up to US$500m, the fund has an eight-year term and is understood to be making up to 35 floating-rate investments with an average rating of single-B.

“We’re coming at ABF with a broad securitisation lens,” says TwentyFour’s co-head of ABS Douglas Charleston. “Instead of just buying bonds issued by SPVs, we’re buying assets into SPVs and then we’re taking the junior risk on those assets. The founding principles of this market are crucial for us, bankruptcy remoteness from corporates and clear legally separated recourse to cashflows.” 

TwentyFour has seen strong traction from pension funds, endowments, family offices and consultants for its investor base. The London-based firm had considered launching the vehicle two years ago, but felt the space had not evolved enough to market the strategy.

“What we're finding is, when we started to talk to investors globally two years ago about ABF, most LPs were just looking at conventional private credit, direct lending and happily allocating more capital in that huge growth area,” says Charleston. “That started to change 12 months ago when people started talking about ABF as an alternative, conducting research.”

“US investors made the first allocations, and now there is a broadening of this globally,” he adds. “Once you've got an ecosystem of ABF GPs and that capital becomes more reliable – like a decade in direct lending demonstrated – opportunity supply responds positively.”

Charleston also explains that he had been surprised at how many newcomers had been launched this year with different angles on the market. As with any hot part of the market, these new entrants play a key role in building the landscape. ABF is no different, with SCI currently tracking four key managers that have launched this year.

In June, it was reported that Emso Asset Management’s head of private credit, Marco Lukesch, had departed, looking to set up a new multi-currency ABF fund targeting emerging markets. Meanwhile, in November, former Goldman Sachs veteran Luca Lombardi launched ArxNova Asset Management in London, which will invest in European ABF and structured credit. Both are actively seeking capital from investors. 

Alec Lingorski, managing director at Alvine Capital, says new managers usually choose a deal-by-deal approach before later raising their first commingled fund. “We're seeing a lot of people doing deal by deals to build some sort of track,” he says. “I think in this day and age, not having a relatively well-known anchor or a substantial first close is very difficult.”

Leading the charge

From an investor standpoint, Lingorski sees private wealth, especially family offices, as strong players. They achieve flexibility by working with the GP early on and can typically provide smaller ticket sizes.

“They can get a different type of alignment with the GP,” says Lingorski. “They come in early and can get co-investment rights. We're also seeing funds of funds who want to diversify out their exposure and there's a select few pension and insurance [investors] that will invest too.”

Compared to mature strategies such as direct lending in Europe, ABF is still in its early stages of development. This can be a double-edged sword. LPs may be reluctant to back newer players with limited track records.

Olga Goffin, investment research manager and head of fixed income research for Barnett Waddingham, says: “I think, at the very least, we would prefer if our clients were to access this market using an established manager which has been in direct lending for many years or a manager which has a lot of experience in structured credit. Whilst new entrants in some cases may offer attractive returns, it's not the kind of risk which our clients have an appetite for at the moment because it's harder to be sure of the expertise and the track record.”

Tero Pesonen, private credit and private equity director at LocalTapiola Asset Management, a Finnish insurance group, also makes a similar point. He explains that, from an investor perspective, it is difficult to build the knowledge base for subcategories in ABF when it is still a new and ever-developing strategy.

Pesonen says that, at this stage, few LPs have extensive experience in the ABF market. When it comes to the different subcategories and their DNA, they are yet to build the experience and ability to react and move. He adds: “I would say first time managers will have a problem raising unless there's such a massive allocation push from LPs that they just want any exposure that they can.”

Drawdown or evergreen

With liquidity needs tightening in recent years and investors seeking greater flexibility in lockups, evergreen structures have become increasingly common to meet these needs.

Managers such as Chenavari and L&G are launching new evergreen ABF funds next year. Although frequently discussed, Alvine’s Lingorski feels the channels or capital interested in these types of structures are currently quite limited.

“It's a question we get quite a lot,” he says. “Everyone's talking about evergreen, but it's the banks, it's certain funds of funds and it’s certain multifamily offices, especially if you talk about Europe. But we don't really see the interest from the pension side or the insurance side or more established family offices.”

TwentyFour opted for a drawdown structure to err on the side of liquidity caution. Although semi-liquid, managers of evergreen structures often utilise initial lock-up periods in the fund's terms before allowing redemption requests.

“Investors may understand that a semi-liquid fund can be gated, but if you do restrict liquidity when they need it most, it doesn't mean they'll forgive you,” says Charleston. “We said that we're just going to go for traditional drawdown structure, be cautious on liquidity, and be clear that we do not need to make concessions on the portfolio investments and returns, which otherwise might be needed.”.

“The incentives are not aligned with investors, so that's one thing,” says LocalTapiola’s Pesonen. “And investors always need to remember that whatever the liquidity terms of the evergreen fund are, when the liquidity is needed, it's never there.”

Jacob Chilvers

Capital Relief Trades

Japanese lender completes first Asia Pacific SRT

SRT market update

SMBC has closed its first SRT transaction out of its Asia Pacific division, referencing a US$3.2bn portfolio of Australian and Asian project finance loans. The deal was executed in partnership with three strategic sponsors – Blackstone, Stonepeak and Clifford Capital. 

SMBC says the SRT aligns with its strategy to improve return on equity and recycle capital for redeployment, while maintaining long-term relationships with sponsors active in the infrastructure and project finance space. “This inaugural SRT is a strategic step to further enable our client-centric growth in the region, while optimising our capital returns,” comments Katsufumi Uchida, head of SMBC’s Asia Pacific division. 

The deal marks SMBC’s first infrastructure-focused SRT in Asia Pacific and follows the bank’s landmark SRT transaction completed by its US division in April 2025, highlighting a broader push to utilise SRTs across its global franchise. 

Nadezhda Bratanova

Capital Relief Trades

Pair of Spanish securitisations print

SRT market update

BBVA has closed a pair of securitisations, in which the EIB Group has invested a total of €714m. The investment will enable BBVA to mobilise approximately €1.3bn to finance the liquidity and investment needs of SMEs, mid-caps and entrepreneurs in Spain, as well as the construction and renovation of sustainable housing.

One transaction involves a synthetic securitisation of a mortgage loan portfolio, enabling BBVA to create a portfolio of approximately €230m in 100% green mortgages. These mortgages are intended for individuals and property developers to finance energy efficiency projects and the construction of near-zero emission buildings in Spain.

The EIF will cover losses in the upper mezzanine tranche, amounting to approximately €115m, €85m of which is counter-guaranteed by the EIB under a risk-sharing arrangement. Under this structure, private investors will cover losses in the lower mezzanine tranche, while BBVA will retain the junior and senior tranches. The tranches are amortised on a pro-rata basis but may be subject to sequential amortisation, depending on how the portfolio performs.

The second transaction involves the securitisation of a consumer loan portfolio, designed to facilitate approximately €1.1bn in financing to help companies cover their liquidity needs and make investments. This financing is expected to have an impact mainly on companies operating in cohesion regions, where per capita income is below the EU average. Entrepreneurs will also receive financing, especially those who are starting new projects or who are in the early stages of growing their businesses.

The senior tranche amounts to €600m, comprising a €400m EIB investment and a €200m bilateral EIF guarantee to ING. The securitisation meets the STS criteria, in line with EU securitisation standards.

Corinne Smith

Capital Relief Trades

Landmark SRT announced in the Baltics

SRT market update

The EIB Group has completed an inaugural SRT based entirely on an Estonian portfolio. The transaction is issued by Estonia’s Coop Pank, providing capital relief that will enable up to €249m of new lending to local businesses.  

The deal marks Coop Pank’s first synthetic securitisation and is backed by both the EIB and the EIF. It references a €200m portfolio of loans and leases to Estonian SMEs and mid-caps and is designed to free up balance-sheet capacity for new lending through to the end of 2028. 

Under the structure, the EIF provides protection on a €171m senior tranche and a €26m mezzanine tranche, while the EIB guarantees both the senior and mezzanine layers. Coop Pank retains the €3m junior tranche. 

The risk transfer will allow Coop Pank to originate up to €249m of additional loans, with at least €49m earmarked for projects advancing gender equality and a minimum of €17m allocated to climate action and environmental sustainability initiatives. 

While the EIB Group has previously supported SME financing across the Baltics region through similar structures, the Coop Pank deal is notable for its exclusive focus on Estonian assets. Key structural features of the deal include synthetic excess spread, a 2.5-year revolving period and pro-rata amortisation of the senior and mezzanine tranches, subject to performance triggers. 

“At the EIB, we remain committed to supporting local economies across the Baltics through innovative and scalable financing solutions that unlock capital for sustainable growth and impact. Through tailored capital markets instruments, the EIB Group helps strengthen local financial institutions and expand access to finance,” comments  Damyan Popovski, a structured products banker within EIB’s debt and structured investments division for the Baltic Sea and Northern Europe.

He adds that building on this momentum, the group is keen to pursue further transactions across the region, partnering with local institutions to enhance lending capacity, optimise balance sheets and support SMEs and the EU’s strategic investment priorities.

Nadezhda Bratanova

ABS

Call for increased EU regulatory ambition

Concerns remain over newly published SecReg texts

The European Parliament’s ECON committee, in charge of negotiating the securitisation reform package, has fired its starting gun on modifying the European Commission’s proposals - with the file’s rapporteur, Ralf Seekatz, publishing draft reports on the proposed Securitisation Regulation amendments and the proposed CRR amendments. Meanwhile, the European Council has agreed its own text, subject to formal final approval by Council Members (COREPER) - which is expected to occur on 19 December. Concerns remain that the Council’s approach will reduce the attractiveness of the European securitisation market for domestic lenders, given that it introduces what AFME describes as “unwarranted tightening” of specific prudential requirements.

Regarding the CRR, a PCS memo notes that the rapporteur has broadly sought to reduce the proposed capital requirements for all categories. This includes reducing the floors in SEC IRBA and SEC SA, reducing most of the scaling factors in the floor calculations and most of the floors of the floors – at least for STS transactions. For SEC ERBA, the formula are gone, replaced by low numbers for senior tranches.

There are also new caps to the floors, while the caps to the p-factor have disappeared – as has the distinction between investor positions and originator positions, and the definition of ‘senior securitisation’. The recital also seeks to eliminate the concepts of ‘resilient securitisation’ on the grounds that STS is already resilient.

Regarding the Securitisation Regulation, PCS notes that there are fewer changes, although there is a proposal to revert to the existing definition of ‘public securitisation’. The report removes the obligation for private securitisations to lodge data with repositories, albeit it will still need to be available to regulators.

Investor sanctions are reduced to twice the invested amount, with the liability for investors delegating the investment decisions to investment managers shifted to the delegate. And eligibility criteria for insurance companies providing unfunded credit protection in synthetic format for the transactions to be STS are improved.

Meanwhile, AFME welcomes the Council’s position on the Securitisation Regulation for addressing key concerns arising from the Commission’s proposal, such as delegation and sanctions. However, the association argues that the tightening of prudential requirements are not justified by the underlying risk profile and would impede the ability of banks to provide financing to businesses efficiently. 

It also calls for the European Parliament to put forward “a more ambitious position” - one that refines both the Commission’s proposals and the Council’s position. “This would help unlock capital to support businesses across Europe and contribute to broader EU policy objectives, including the delivery of affordable housing for EU citizens. These objectives can be achieved while maintaining strong macro prudential stability in the EU banking sector,” observes Shaun Baddeley, md of securitisation at AFME.

In relation to the Securitisation Regulation, according to AFME, key areas where the Council’s position could have taken a more ambitious stance include: the asset threshold for unfunded credit protection providers; requiring private transactions to report to securitisation repositories; and applying a 50% public securitisation cap for UCITS. In relation to the CRR, the association highlights: risk weight floor calculations, which still lack risk sensitivity; and the p-factor, which remains unchanged in certain scenarios. 

MEPs have until 27 January to propose additional amendments, with a view to the Parliament finalising all its amendments to the draft legislation by 5 May. Once both the Parliament and Council texts are finalised, they enter trilogue negotiations, with a view to agreeing a consolidated version that becomes law.

Corinne Smith

ABS

Debut public Lithuanian securitisation prints

UAB ILTE completes apartment renovation loan securitisation

UAB ILTE has closed the first-ever public Lithuanian securitisation. Called Vytis Reno Loans 2025-1, the €163m consumer loan transaction was arranged by Alvarez & Marsal.

The transaction securitises a €160.5m portfolio of apartment renovation loans originated by UAB ILTE, a Lithuanian state-owned institution, to individual apartment owners of multi-apartment buildings across Lithuania. As of the July cut-off date, the highly granular portfolio comprised 24,982 monthly-paying consumer loan receivables granted to 12,542 individual borrowers.

Rated by Fitch and Scope, the deal comprises €81.2m of triple-A rated Class A notes (which have a coupon of three-month Euribor plus 110bp), €31.1m of triple-A Class A loan notes (three-month Euribor plus 110bp) and €50.96m of unrated Class B fixed rate notes (1.00%). The notes, which mature in 2053, are listed on Nasdaq Vilnius.

The loans, which initially carried a 20-year term, feature an 18- to 24-month grace period. Each loan received a state grant equal to 30% of its original principal, though this grant portion is not included in the securitised assets.

Maria Lehtimäki, partner at Waselius, predicts that the deal could precipitate further public ABS activity from Lithuania, with asset focus likely to be more on consumer loans/unsecured consumer or SMEs. “Baltic banks are well represented in these segments in the Nordic and Baltic regions,” she says, noting that "existing licensed banks and fintech have a good commercial and regulatory environment to operate and grow in."

Marina Torres

Asset-Backed Finance

Pinnacle Bank signs strategic partnership with Greystar

ABF deal will build Pinnacle's bridge lending platform

Editor's note: updated on 17 December with further details on the structure.

Pinnacle Bank has entered a strategic partnership with residential real estate specialist Greystar. The resultant ABF deal is structured to support the expansion of Pinnacle’s bridge lending programme.

The transaction is a committed forward-flow loan sale from Pinnacle to Greystar, with committed seller financing. It is structured to achieve several goals, including reducing risk-weighted assets, lowering commercial real estate concentration, enabling Pinnacle to grow its loan portfolio and to provide customers with flexible financing options. While this forward flow transaction is not structured as a traditional SRT, it uses key features that are in funded SRT transactions to achieve the benefits to Pinnacle.

Greystar, working from its second Credit Opportunities Fund, will act as the junior capital partner across Pinnacle’s bridge loan pipeline under the transaction. The deal also provides additional operational expansion for Pinnacle’s commercial real estate platform and greater certainty of execution for its clientele.

“We believe this transaction strengthens our financial position by reducing the bank's risk-weighted assets, lowering commercial real estate concentrations and mitigating credit risk in the loan portfolio,” comments Harold Carpenter, cfo for Pinnacle.

Stifel acted as the structuring and placement agent to Pinnacle Bank on the transaction.

“This transaction underscores how Greystar can partner with banks, life companies and other intermediaries to support their borrowers nationwide in the rental housing and industrial sectors,” adds Jason Cohan, head of portfolio management and capital markets for Greystar’s credit business.

Founded by Bob Faith in 1993, Greystar has over US$79bn of AUM and manages teams across North America, Europe, South America and the Asia-Pacific regions.

Pinnacle Bank, a subsidiary of Pinnacle Financial Partners, provides a full range of banking, investment and mortgage products and has approximately US$56bn in AUM.

Jacob Chilvers

Asset-Backed Finance

ABF Deal Digest: Sardis Group targets retail investors with private market interval fund

A weekly roundup of private asset-backed financing activity

This week’s roundup of private ABF activity sees securitised credit investment management firm Sardis Group launch an interval fund seeking to provide private market exposure to retail investors. Elsewhere, Blackstone Credit & Insurance (BXCI) has agreed a small business loan forward flow origination partnership with Harvest Commercial Capital.

Sardis Group has launched the Sardis Credit Opportunities Fund (SGSIX), a continuously offered, closed-end interval fund seeking total return through current income and capital appreciation. Sardis Group’s inaugural registered fund, SGSIX will focus on a portfolio encompassing the asset-backed, residential and commercial real estate subsectors in both securities and loans.

The fund will be actively managed, striving to uncover relative value opportunities to drive returns. This targeted focus aims to provide investors with potentially superior risk-adjusted total returns across all credit cycles, driven by high current income and long-term capital.

SGSIX seeks to provide private-market credit exposures to retail investors in a way that could provide diversification and a differentiated source of return, relative to corporate credit and direct lending strategies. The team believes interval funds are the ideal vehicle for investment in the credit space, as the periodic liquidity can balance investor access with greater portfolio stability. Furthermore, the interval fund structure drives increased transparency relative to private funds.

Alpha Bank transfers NPE portfolio

Alpha Bank has divested a portfolio of non-performing exposures (NPEs) to Greek SMEs, with a gross book value of approximately €450m, as of 31 December 2024. The portfolio was acquired by Waterwheel Capital Management, through affiliated entities.

The portfolio - referred to as Project Solar 2 - was initially part of the broader ‘Solar’ initiative, a joint effort by Greek banks to structure a securitisation under Law 4649/2019, which was ultimately not consummated. The servicing has been assigned to Cepal Hellas, a licensed servicer regulated by the Bank of Greece.

The transaction marks the third major portfolio trade between Alpha Bank and Waterwheel Capital, following the successful completion of the GAIA I and GAIA II securitisations. It forms part of Alpha Bank’s strategy to actively manage and reduce its stock of NPEs.

Alantra acted as financial advisor to Alpha Bank on the transaction.

Waterwheel also acquired Piraeus Bank’s Solar 2 NPE portfolio last month.

BXCI inks SBA loan origination partnership

BXCI has agreed a forward flow origination partnership with Harvest Commercial Capital, a leader in small business lending, to acquire business loans secured by first lien mortgages on owner-occupied commercial real estate. Under the terms of the partnership, BXCI has purchased an initial portfolio of loans and established a forward flow programme for a total of US$1bn in loans.

Under the long-term partnership, BXCI will acquire small business loans from Harvest, including both SBA 504 and non-SBA conventional loans, providing permanent capital to expand lending to small businesses across the US. Harvest will continue to operate independently, maintaining its specialised expertise in SBA 504 and conventional small balance commercial loans, while benefitting from Blackstone's platform and scaled insurance capital base.

Crediapoyo closes fourth consumer deal

Finacity Corporation has facilitated another US$15m securitisation of a portfolio of consumer loans originated by Crediapoyo. The deal marks the firm’s fourth transaction with Finacity over the past year.

The securitisation was executed through a Mexican trust with an FX hedge to match the assets and liabilities. It was funded by a global investment management firm based in New York.

Finacity acted as structuring agent and will serve as the master servicer responsible for all ongoing programme administration and reporting.

Corinne Smith

CLOs

ELFA updates guidelines to improve CLO reporting

Trade body adds information for a number of areas where inconsistent reporting is holding back the industry

The European Leveraged Finance Association (ELFA) has added more information to its best practice guidelines around the reporting and disclosure of CLO transactions, part of a CLO data engagement initiative aimed to aid transparency and standardisation in the sector.

The ‘Best Practice Guidance for the Reporting and Disclosures of CLO Transactions’ document, which was updated last Thursday (11 Dec), now includes an annex with further information around key problem areas highlighted by industry stakeholders and ELFA’s own analysis, laying out a series of data points that should be included in trustee reports.

ELFA argues that the reporting gaps it highlights include a number of data points that are frequently omitted or inconsistently reported. This leaves investors without enough information to adequately assess CLO performance and is actively constraining the liquidity of the asset class.

The guidance also outlines issues to address how data points including trading gains and par flush, the CLO’s pre-approved trading plan, restructuring and repayments, cash flows, collateral IDs, disclosure of long-dated obligations, maturity amendments, and uptier priming debt are reported by managers.

Speaking to SCI, Ed Eyerman, CEO of ELFA says: “The ELFA CLO Investors Committee noted a lack of detail and inconsistencies among managers disclosure practices in par flush and in restructurings, notably the manner in which value adjustments are reported in restructurings with up-tiered priming debt. CLO investors need more visibility in standard reporting formats to measure risk in underlying collateral pools.”

He also highlights additional issues addressed in the annex that he thinks will be significant for improving CLO transaction reporting in the future. This includes extension risk from amend and extend (A&E) agreements and restructurings, specifically highlighting voting details such as “snooze drag” transactions.

Eyerman, adds: “The ELFA CLO Investors Committee noted material advancements over the past 10 years in data and technology available to CLO managers, without commensurate improvements in disclosure and reporting standards in trustee reports”.

The updates guidelines follow the trade body’s trustee best practices set out in March aimed at improving transparency in CLO reporting.

Solomon Klappholz 

CLOs

Solvency 2 recalibration reopens door to CLOs but hurdles remain

S&P says capital relief improves senior tranche economics, though a broad-based shift in insurer demand is far from guaranteed

Reforms to Solvency 2 could significantly reduce capital charges on senior securitisation tranches, including triple-A CLOs. However, S&P Global Ratings cautions that the changes alone are unlikely to trigger a rapid or broad-based return of European insurers to the CLO market.

Under amendments adopted by the European Commission in October, and due to apply from January 2027, capital charges for senior, non-STS securitisations will fall sharply, with triple-A CLO tranches seeing reductions of around 60%-80% from historically punitive levels, according to S&P’s latest report entitled ‘Will Solvency 2 Changes Unlock Securitisation For EU Insurers?’.

The recalibration narrows the gap between CLOs and corporate bonds in terms of return on regulatory capital, one of the key factors that drove insurers out of securitisation markets following the introduction of Solvency II in 2016.

However, Andrew South, head of structured finance research for EMEA at S&P Global Ratings, says the economics remain finely balanced.

Speaking to SCI, he says: “Purely based on standard capital charges, triple-A CLO tranches could become more compelling for some insurers. But they will have many other considerations, including maturity profile, the fact that CLO tranches are floating rate, complexity, liquidity and so on.”

He adds that insurers using internal capital models will see little direct impact from the Solvency 2 recalibration, further limiting the potential breadth of renewed demand.

While the capital relief is most pronounced at the top of the capital structure, South does not expect a wave of CLO-specific structuring changes designed to cater to insurers.

“Even if insurers’ interest in CLOs increased, any structuring changes would have to not be detrimental to the interests of other investors, who would still account for by far the majority,” he says.

However, S&P has observed limited precedent in niche segments. “We’ve seen some moves to make middle market CLOs more insurer-friendly in the UK, given changes to the Solvency UK matching adjustment rules in 2024,” South notes, describing this as a narrow but notable development rather than a pattern for the broader CLO market.

Despite the reduced capital penalty for non-STS securitisations, CLOs remain firmly outside the EU’s STS framework, and S&P sees little prospect of that changing.

“There aren’t any indications of a pathway for CLOs to become STS-eligible,” South says. “Given that the European Commission has recently reviewed many aspects of the EU securitisation rules and not proposed that kind of change, I think it’s fairly unlikely.”

Timing is another constraint. Even if insurers ultimately re-engage with securitisations, S&P expects any shift to be slow and deliberate rather than anticipatory.

“I don’t think it’s a given that insurers will add securitisation exposure as a result of these changes, even if one of the barriers has been lowered,” South says. “If some insurers did decide to venture back into the securitisation market, they would probably want to wait to see how the rest of the EU’s re-regulation project pans out.”

With broader reforms to the EU securitisation framework unlikely to be finalised until late 2026, and operational hurdles such as rebuilding specialist teams still to be addressed, South expects any increase in insurer participation to be gradual at best.

Overall, S&P’s analysis suggests that while Solvency II reform meaningfully improves the relative capital treatment of senior CLO tranches, it is unlikely on its own to restore insurers as a cornerstone investor base for European CLO issuance - at least in the near term.

 Ramla Soni

Structured Finance

Job swaps weekly: Barrenjoey snaps up asset-backed income fund

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps – and the final roundup of 2025 – sees Barrenjoey Private Capital acquiring an asset-backed income fund from Trefor Capital and incorporating two of the strategy’s leaders into its team. Elsewhere, A&O Shearman has made a senior hire in its fund finance practice in New York, while Cadwalader has promoted nine securitisation lawyers to partner and announced it is to merge with Hogan Lovells.

Barrenjoey Private Capital has acquired Trefor Credit Fund 1, which will now be known as the Barrenjoey Asset Backed Income Fund. The move sets the fund up for its next phase of growth, according to a statement, leveraging the broader platform and deeper capabilities that Barrenjoey provides.

As part of the transition, Trefor Capital principal Eric Williamson and investment committee member Eva Zileli have joined Barrenjoey, and will continue to run the fund on a day-to-day basis. Prior to joining Trefor Capital in August 2023, Williamson held senior roles at Wingate, Cerberus Capital Management, Bluestone Home Loans, NAB, Close Brothers and Arthur Andersen. Zileli joined Trefor Capital in August 2024, having held senior roles at Latitude Financial Services, NAB, Lehman Brothers and PriceWaterhouse before that.

Barrenjoey’s private capital business manages A$4.9bn across private credit, private equity and real assets.

A&O Shearman has strengthened its fund finance practice in New York with the hire of Jan Sysel as a partner. Sysel will lead the expansion of the firm’s US fund finance platform, marking a key step in its broader efforts to grow its debt finance capabilities and expanding into the private capital markets. He joins from Fried, Frank, Harris, Shriver & Jacobson and brings more than two decades of experience structuring and executing complex fund finance transactions, including sub-lines, asset-based facilities and hybrid financings.

Simmons & Simmons has hired former Slaughter and May partner and structured finance lawyer Oliver Wicker. Wicker’s exit from Slaughter and May was announced earlier this year, marking the end of a two-decade tenure at the firm, where he was made partner and head of derivatives in 2016. A rare departure from the tightly knit Slaughter and May team, his arrival represents a significant boost to Simmons & Simmons’ structured finance and derivatives offering, with Wicker joining as a partner focusing on complex transactions both in the UK and internationally. 

Ibrahim Kamara has joined Bank of America as director, securitised products from Lloyds Bank Corporate & Institutional where he had been a director since 2024. Prior to that he was executive director at Morgan Stanley and also spent six years at S&P Global Ratings in the roles of associate director and director.

Elmwood Asset Management has appointed Pavan Lotey as head of European CLO and loan operations. He joins from HPS Investment Partners where he was executive director having started as an associate in 2016. Prior to that he has held CLO analyst roles at CQS and Bank of America.

BNP Paribas has appointed Fernando Lopes as SRT structuring securitisation portfolio manager, based in Frankfurt. Lopes joins from European DataWarehouse, leaving his role as senior structured finance data analyst after two and a half years with the business. Lopes previous worked at 321 Credito and EY.

Paarik Bharadia has been promoted to AVP - associate, structured products CLO operations at Neuberger Berman. He started at the firm in August 2021 as a structured products analyst. Prior to that he held several senior analyst roles at firms including Intertrust Group (capital markets), Wells Fargo as a securities analyst and US Bank as CDO reporting analyst, dealing with daily portfolio management of five multi-currency CLO deals which also included warehousing, ramp up, closing and redemption.

Lloyds has made two senior debt capital markets hires in Frankfurt, including sustainability specialist Tanja Gihr, who joins as md and head of northern European debt capital markets and sustainability. Gihr brings more than 20 years of investment banking experience spanning capital markets, banking and private equity transaction services across the DACH region. She joins from Barclays, where she spent 19 years in the investment bank, most recently serving md and head of sustainable banking group.

And finally, Cadwalader is to merge with Hogan Lovells, with the consolidated business due to be rebranded as Hogan Lovells Cadwalader. The combined group will have 3,100 lawyers across the Americas, EMEA, and APAC. The announcement comes just days after Cadwalader promoted 24 lawyers to partner. Of the promotions, nine are securitisation-related.

David Kiernan is a partner in the London-based capital markets team and focuses on a wide range of capital markets and financing transactions, with an emphasis on structured finance and securitisation. He has experience advising financial institutions and asset managers in connection with international finance transactions across a variety of traditional and esoteric asset classes, CLOs, middle-market facilities, back leverage facilities and other loan warehouse facilities.

Also promoted to partner in the London office is John Lambillion, special counsel in the financial restructuring team. His practice focuses on advising creditors in restructuring and special situations transactions, with a particular focus on complex cross-border restructurings, liability management exercises and financings.  John represents banks, private credit funds, CLOs and alternative investment funds with exposures across the credit spectrum, and works closely with our Global Litigation and Leveraged Finance and Private Credit teams.

Of the other securitisation-related promotions to partner, five are in Cadwalader’s New York office. This includes Michael Altman, Jessica Zeichner, Michael Ena and Michelle Gellman, who are all special counsels and Alexander Strom, who is counsel. 

Altman’s practice focuses on capital markets, specifically representing issuers, underwriters and mortgage loan sellers in both public and private commercial mortgage-backed securitisation transactions. He also has experience handling Exchange Act filings, including public registration statements for new and repeat issuers.

Zeichner is also part of the capital markets team and focuses her practice on representing issuers, underwriters and mortgage loan sellers in both public and private commercial mortgage-backed securitisation transactions. She also prepares registration statements for new and repeat public issuers, and has experience working on municipal bond refinancings.

Ena is part of the financial services team and focuses on derivatives, structured financial products and financing transactions. He has represented financial institutions and corporate clients in connection with a broad range of equity derivatives, cryptocurrency and other digital asset derivatives, debt total return swaps, credit default swaps, repurchase and reverse repurchase transactions, interest rate and foreign exchange derivatives, financing arrangements, capital relief trades and matters involving convertible, exchangeable and equity-linked securities.

Gellman is also on the financial services team and her practice focuses on complex structured finance and derivatives matters. She advises clients on a wide range of OTC derivatives products, structured finance products, municipal finance products and other structured transactions that combine securitisation techniques and derivatives.

Storm is on the financial restructuring team, and his practice is concentrated in the area of financial restructuring with a focus on structured finance and securitisations.  He represents lenders in connection with bankruptcy-remote commercial mortgage loan originations, commercial mortgage-backed securitisations and asset-backed securitisations. Alex has significant experience in developing structures designed to protect lenders in these complex securitisation and lending transactions.

The two remaining promotions are for special counsels Eunji Jo and Aaron Kennedy, who are based in Charlotte. A member of the real estate team, Jo’s practice focuses on the origination of complex real estate loans of all balance sizes and exit strategies, including those intended to be held for investment and those intended to be syndicated or securitised. She advises financial institutions on a broad range of real estate finance matters, including the acquisition, financing and disposition of all types of properties, including office, retail, hotel, industrial, data centers, self-storage, multifamily and mixed-use properties.

Kennedy is part of the capital markets team and his practice focuses on commercial mortgage-backed and CRE CLO securitisation transactions, warehouse lending and the workout and restructuring of securitised and other financial assets. Aaron represents investment banks and financial institutions in their roles as issuers, underwriters, placement agents and mortgage loan sellers in both public and private offerings of commercial mortgage-backed securities and other structured finance products and in their role as repo buyers in the context of warehouse lending.

Corinne Smith, Claudia Lewis, Ramla Soni, Kenny Wastell