Acquisitions

Blackstone is set to acquire all outstanding common shares of Gramercy Property Trust for US$27.50 per share in an all-cash transaction valued at US$7.6bn. The transaction represents a premium of 23% over the 30-day volume-weighted average share price ending 4 May 2018 and a premium of 15% over the closing stock price on that date. Completion of the acquisition - which is currently expected to occur in 2H18 - is contingent upon customary closing conditions, including the approval of Gramercy's shareholders, who will vote on the transaction at a special meeting on a date to be announced.

Two Harbors and CYS Investments have entered into a definitive merger under which Two Harbors will acquire CYS. Upon the closing of the merger, CYS stockholders will exchange their shares of CYS common stock for newly issued shares of Two Harbors common stock as well as aggregate cash consideration of US$15m payable to CYS stockholders on a pro rata basis.

CDS alternative offered

DelphX Capital Markets has unveiled a new alternative trading system (ATS) and new securities products through its subsidiaries DelphX Services Corp and Quantem Capital Corp, which are designed to provide a securities-based alternative to the single-name CDS market. Subject to FINRA approval and SEC filings, the DelphX ATS will enable qualified institutional buyers to negotiate, purchase and trade via a distributed ledger new forms of securities that will be linked to referenced credit default risk and provide credit protection for underlying US dollar-denominated corporate, municipal and sovereign debt securities. Meanwhile, the new Quantem securities comprise: covered put option securities that provide secured default protection for US dollar-denominated corporate, municipal and sovereign securities; and covered reference note securities that allow investors to take exposure to the default risk of a single underlying security or to participate in a pool that broadly diffuses the risk impact of credit events among all participants.

CRT index launched

Mark Fontanilla & Co has launched the CRTx Credit Risk Transfer Return Tracking Index, the first-ever fixed income index that tracks the total return performance of agency credit risk transfer securities issued by Fannie Mae and Freddie Mac. Rebalanced monthly, the CRTx has over 170 active constituent securities representing US$45bn in market value and referencing over US$1trn in underlying mortgages. The index suite includes an aggregate index and a series of sub-indexes – the CRTx Upper Mezzanine, Lower Mezzanine and Subordinate indices – that will be additionally segmented by issuance year vintages, starting with 2013/2014 onwards. CRTx security updates, database technology and auxiliary calculations are powered by MBS Data.

Europe

Angelo, Gordon has hired Steven Paget as md and portfolio manager, European performing credit. Paget will lead the growth of Angelo, Gordon’s European performing credit business with a focus on developing the firm’s European CLO platform and investing in the debt and equity tranches of third party CLO managers. He will be based in London and report to Dan Pound, head of Europe, and Maureen D’Alleva, head of non-investment grade corporate credit. Paget was most recently a portfolio manager on the European leveraged finance team at PGIM fixed income.

Hermes Investment Management is expanding its fixed income team with two new hires in London. Andrew Lennox has been hired asset backed securities portfolio manager making investment recommendations within the European ABS universe, reporting to Vincent Nobel, head of asset based lending. Lennox joins from Blackrock where he was a senior portfolio manager in the European asset backed securities team. Stephane Michel has also been appointed as senior portfolio manager, working on asset based lending and multi-asset credit. Michel was previously consulting on the credit space, ranging from regulatory capital trades to the development of a CLO and direct-lending platform and has also previously spent five years at UBS.

Ground rent notes cut

Moody's has downgraded the rating of the €62m secured instruments class issued by German Ground Lease Finance from A2 to Baa1, reflecting the negative impact to the term and refinance risk from higher transaction costs. The agency notes that a renegotiated increase in fees paid to the servicer – Immofori - and continuously high transaction costs mean no further amortisation is expected, while the reduced coverage means the term default probability has increased. The deal represents the securitisation of four real estate funding notes that are, in turn, secured by the rental income derived from hereditary building rights in relation to a portfolio of more than 4,100 residential units located in various German cities.

MBS fraud charge

The US SEC has charged Premium Point Investments with inflating the value of private funds it advised by hundreds of millions of dollars. The SEC has also charged Premium Point’s ceo and cio Anilesh Ahuja, as well as Amin Majidi (a former partner and portfolio manager at the firm) and Jeremy Shor (a former trader). According to the SEC’s complaint, the scheme ran from at least September 2015 through March 2016 and relied on a secret deal whereby in exchange for sending trades to a broker-dealer, Premium Point received inflated broker quotes for MBS. In addition, the defendants allegedly used ‘imputed’ mid-point valuations, which were applied in a manner that further inflated the value of securities. This practice allegedly boosted the value of many of Premium Point’s MBS holdings and further exaggerated returns, in order to conceal poor fund performance and attract and retain investors. The complaint seeks permanent injunctions, return of allegedly ill-gotten gains with interest, and civil penalties.

North America

Echelon Investment Partners has appointed Kevin Mallon to serve as its director of marketing in a newly-created role. Based in the firm's main office in New Jersey, Mallon will be responsible for implementing and managing investor relations and business development efforts. He most recently served as director of marketing for Old Hill Partners, an investment adviser specialising in customised asset-backed lending transactions with middle-market companies.

Flat Rock Global has hired Shiloh Bates to the position of md. He was previously md at Benefit Street Partners where he worked on corporate acquisitions and prior to that was head of structured products at BDCA Adviser overseeing investments in CLOs amongst other duties.

RMBS criteria released

KBRA has released its methodology for rating European RMBS and the related UK Addendum, which addresses analytical considerations specific to prime, buy-to-let and non-conforming mortgages in the UK. The publication outlines several determinants used in formulating KBRA ratings, including: review and analysis of key transaction participants; review of agreed-upon procedure report(s); loan credit analysis and RMBS modelling; assessment of the securitisation framework from a structural and legal perspective; and ongoing surveillance of the transaction. The move follows the issuance last month of KBRA’s first published European structured finance ratings, which were in respect of Funding Circle’s £206.6m Small Business Origination Loan Trust 2018-1.

Settlements

RBS has reached a civil settlement in principle with the US Department of Justice to resolve its investigation into the bank’s issuance and underwriting of US RMBS between 2005 and 2007. Under the terms of the proposed settlement, RBS will pay a civil monetary cash penalty of US$4.9bn, of which US$3.46bn will be covered by existing provisions made by the bank, with an incremental charge of US$1.44bn in 2Q18 (booked in NatWest Markets on a consolidated basis). The proposed settlement is subject to the DOJ and RBS entering into a legally-binding agreement. As at 31 March, RBS held provisions of US$800m for other legacy RMBS matters.

Zohar CDO 2003-1, Zohar II 2005-1, Zohar III, Lynn Tilton, MBIA Insurance Corp and the Zohar III controlling class of noteholders have mutually resolved the motions pending in the Delaware federal bankruptcy court relating to the Zohar funds (SCI passim) and have agreed to a deal that will include a 15-month stay of all pending litigation between the parties. This agreement is intended to facilitate the refinancing and monetisation of assets of the Zohar funds to the benefit of all stakeholders, with the parties agreeing to work in a mutually cooperative process in support it. As part of the agreement, an independent director will be appointed to govern the Zohar funds, along with a chief restructuring officer (Marc Kirschner of Goldin Associates), who - together with Tilton as director and manager of each portfolio company - will jointly implement the refinancing and monetisation process. During the process, Tilton will remain in her current roles at the portfolio companies and the bankruptcy cases will proceed without the appointment of a trustee. Judge Kevin Gross acted as mediator to facilitate the settlement.