Acquisitions

BlackRock has acquired Tennenbaum Capital Partners (TCP), complementing its global credit business at a time when clients are increasingly turning to private credit as a higher-yielding alternative to traditional fixed income allocations. A key element of the transaction – which is expected to close in Q3 - is the continuity of TCP's senior management team, including all five partners (Lee Landrum, Michael Leitner, Howard Levkowitz, Philip Tseng and Rajneesh Vig). Together, BlackRock and TCP - as a wholly-owned subsidiary of BlackRock - expect to offer clients a premium and expanded set of private credit investment opportunities. TCP is based in Los Angeles and has approximately US$9bn of committed client capital, as of 31 December 2017, and a staff of over 80 people. Pending the approval of shareholders, TCP will remain the investment adviser of TCP Capital Corp, its BDC.

IHS Markit has acquired DeriveXperts, a provider of valuation services for OTC derivatives and other complex financial securities. The acquisition complements and enhances IHS Markit’s existing derivatives data and valuations businesses, and strengthens it client base in France and French-speaking Europe.

Pimco has acquired a 30% stake in NPL asset manager and special servicer Phoenix Asset Management (PAM). PAM founder and cio Steve Lennon, together with the firm’s other founding partners now hold 40% of the corporate capital, while AnaCap Financial Europe continue to hold a 30% stake. Following the transaction, PAM will remain operating as an independent platform, with the current management team confirmed.

B-piece sale

KKR Real Estate Finance Trust (KREF) has sold its CMBS B-piece portfolio for net proceeds of US$112.7m, representing the exit from four of its five direct B-piece investments and accounting for 87% of the market value of its total direct B-piece portfolio, as of year-end 2017. The investments were made between 2Q15 and 1Q16, and the weighted average realised IRR and multiple of invested capital for the investments exited to date were 18% and 1.3x respectively. Including the company’s estimated fair value for its remaining CMBS B-piece investments, the estimated net gain for its total direct CMBS B-piece portfolio for the six months ended 30 June 2018 is expected to be US$10.6m-US$11.9m or 20-22 cents per share. The company plans to redeploy the proceeds from the sale into its target assets, primarily floating-rate senior loans. After the sale, KREF continues to hold approximately US$14m of direct investments in CMBS B-pieces with a cost basis of US$10m and has a US$40m commitment to invest in an aggregator vehicle alongside KKR Real Estate Credit Opportunity Partners.

Fails charge floor

The Treasury Market Practices Group (TMPG) has updated the existing fails charge trading practices for US Treasury, agency debt and agency MBS by including a floor of 1% per annum to ensure that a minimal charge remains in place, thereby maintaining operational continuity of the practices. In February, the TMPG published the proposed updates to the fails charge practice recommendation for public comment and is says that feedback from market participants was, on balance, supportive of the proposed modification. The group recommends that the change is implemented for transactions entered into on or after 1 July 2018, as well as for transactions entered into prior to but which remain unsettled as of that date.

IM solution launched

Allen & Overy, IHS Markit and SmartDXfrom have launched Margin Xchange, an online platform that covers all stages of the mass repapering of derivatives contracts required to comply with initial margin regulations. It provides information reconciliation, document generation, negotiation and execution, case management and a full data export. Users will be able to record every variable as a data point, rather than text, enabling them to maintain a clear view of progress at every stage during the repapering task, provide higher quality progress reports to regulators and represent the documents as data that can be stored and interrogated in the future with ease. 

North America

Amherst Pierpoint Securities has hired Steven Abrahams as senior md and head of strategy. He will lead the firm’s structured products, credit and US rates businesses. Most recently, he co-founded Milepost Capital Management, where he led strategy, research, asset sourcing and selection and reporting for an SEC-registered manager of securities and loans for private funds and institutions. Abrahams will be based in New York and report to executive md, Ryan Mullaney, who among other responsibilities oversees all of APSEC’s sales and trading efforts.

Antares Capital has appointed founding partner Timothy Lyne as senior md and co-head of sponsor coverage and Vivek Mathew as head of asset management and funding. Based in Chicago, Lyne will be responsible for leading the company’s sponsor coverage activities on the East Coast, having previously served as head of the firm’s asset management group. Based in New York, Mathew has led the firm’s funding efforts since he joined in 2016, but in his new role will also lead asset management. He was previously md, head of global primary CLO business at JPMorgan and vp, structured finance at Deutsche Bank.

CAN Capital has hired Tom Davidson as cfo. He joins from Sierra Auto Finance, where he was cfo and chief capital officer. He previously worked at GE Capital for 16 years, most recently as senior md and chairman and ceo of GE Capital Markets, responsible for global securitisation. Ray De Palma, who has served as cfo at CAN Capital since May 2017, will take on the role of chief accounting officer, reporting to Davidson. De Palma will remain part of CAN Capital's executive committee.

The Carlyle Group has hired Taylor Boswell as md on the credit opportunities team and is based in New York. Before joining Carlyle, Boswell worked at Apollo Global Management, serving as an md and investment committee member in the illiquid opportunistic credit business.

Paul Vanderslice has joined CCRE as ceo, starting in 3Q18. Vanderslice previously ran the CMBS Group at Citi, heading up commercial mortgage distribution.

Cerberus Capital Management has named former JPMorgan coo Matt Zames as president, responsible for a number of strategic investing and operating initiatives. Concurrent with this appointment, Frank Bruno has been promoted from president of Cerberus to co-ceo, serving alongside founder and cio Steve Feinberg. Additionally, Lee Millstein has been promoted to president of Cerberus Global Investments, where he will assume responsibility for managing the firm's international business, in addition to his role as global head of real estate.

Dentons has hired Alice Yurke as a partner in its capital markets practice in New York. She provides strategic counsel to clients offering or seeking structured and derivative products, as well advice on risk-based capital and workout-related issues in derivatives and loan transactions. She was previously a partner at Alston & Bird.

Hunter Street Partners has announced the appointment of three members to its inaugural advisory board. They will provide guidance to the firm on its investment strategy, internal operations and management, and transactions. The advisory board members include Steve Adams, a former partner and general counsel at Wayzata Investment Partners, Van Zandt Hawn, md, Goldner Hawn Johnson & Morrison and Jeff Stolt, former partner and cfo at Pine River Capital Management. Stolt joined Pine River in 2002 at its founding and managed the accounting and operations functions until 2016, as the firm grew from US$5m to US$16.8bn in AUM.

PACE lawsuits filed

A pair of lawsuits seeking class action status have been filed in Los Angeles County Superior Court against Los Angeles County, Renew Financial and Renovate America, alleging that the county’s PACE programme has burdened many borrowers with loans that they can’t afford. In particular, the complaints allege that the PACE platform lacks adequate consumer protections. Both Renew Financial and Renovate America have since released statements stressing the high level of consumer protections embedded in their loans, which go beyond those found with other forms of home-improvement financing. For example, HERO PACE financing safeguards include calls to confirm financing terms with homeowners, written disclosures modeled on the federal ‘know-before-you-owe’ forms for mortgage lending and a guarantee that contractors aren’t paid until homeowners certify that a project is completed to their satisfaction.

Rating agency expansion

S&P has established a sustainable finance team and will be led by Mike Wilkins, md. The team will also be part of the innovation group within the global corporate and infrastructure ratings practice, which focuses on the analytical development of offerings in emerging areas of significant investor interest. The group is led by Hans Wright, head of innovation at S&P, and reports to Susan Gray, global head of corporate and infrastructure ratings.

Rating error

Moody's has corrected the rating on the class K notes issued by GMACCM 1999-C2 to B3 from B1. The agency has disclosed that due to an internal administrative error, the notes were inadvertently upgraded to B1 from Caa2 on 22 March 2018.

Tesla recall

Tesla has initiated a voluntary recall of 123,000 Model S vehicles built before April 2016, prompted by concerns regarding excessive corrosion to bolts in the power steering mechanism in cold winter climates. Moody’s indicates that the recall is marginally credit negative for the Tesla Auto Lease Trust 2018-A securitisation, as vehicles equipped with these bolts may have to be fitted with replacement parts before resale after lease maturity and delays in the repairs will temporarily disrupt and reduce residual value cashflows to the ABS. As of end-February, the affected leases make up 28% of the securitisation value, but lease maturities are fairly well distributed over the next year, mitigating the risk that the vehicles will not be repaired in a timely manner. Although there is a large spike in scheduled residual maturities for affected vehicles in March 2019, Moody’s expects that the supplier (Bosch Auto Parts) will have produced enough replacement bolts by then to avoid any potential delays in vehicle repair and remarketing, albeit early turn-ins and lease extensions could affect this maturity schedule. The agency notes that between the November 2017 pool cut-off and the February 2018 reporting period, TESLA 2018-A has experienced residual value gains of around 22% on 57 turned-in vehicles, representing about 0.11% of the transaction's initial securitisation value.