Market updates and sector developments

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

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

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

In other news…

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

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

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

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

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

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

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

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

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