Sector developments and company hires

Acquisitions

Spruce Finance has been acquired by HPS Investment Partners. Spruce will be headquartered in Houston and maintain its executive and M&A offices in San Francisco. Christian Fong has joined the company as president and ceo after holding a position as co-chairman of the board of directors since early 2017. The transaction took place through Spruce Holdings, a new corporate entity owned by HPS Investment Partners.

Credit event

Scope has lowered its rating on the €145m E tranche of Santander’s Renew Project Finance CLO 2017-1 from double-B plus to double-B, after a credit event resulted in the restructuring of one of the underlying projects. The rating agency affirmed its ratings on tranches A to D of the significant risk transfer transaction, reflecting what it says is a “comfortable” level of credit enhancement from subordination. The credit event resulted in losses of 12bp, which were in line with Scope’s expected severity for credit impairment events in the deal. Nevertheless, it notes that the credit event “signals the fundamental economic weakness of several projects in the reference portfolio, which might suffer similar restructurings over the life of the transaction - particularly if Spanish macroeconomic conditions deteriorated further due to political instability.”

Global hires

Mayer Brown has promoted 34 lawyers worldwide to partner including Merryn Craske who will advise banks, originators and others on numerous securitisation and structured finance transactions in a range of asset classes in the banking and finance practice after being promoted from the roll of counsel. Aaron Gavant was also promoted to restructuring, bankruptcy and insolvency partner in Chicago where he will focus on structured finance workout matters after working as associate at the firm.

Mayer Brown has also promoted 16 lawyers worldwide to counsel and will include: Jim Ancone, promoted to litigation and dispute counsel in Mayer Brown's New York office. Ancone previously worked as an attorney and has experience pertaining to the sale of RMBS, CDOs and other financial products. In the banking and finance department Maria Alevras-Chen, Neal Handa and Miller Smith have been appointed to counsel. Alevras succeeds her previous position as corporate finance attorney to focus on international and domestic financings, including bond and equity issuances, leveraged finance, project finance and structured finance. Handa will work in structured finance and securitisation after holding a position as senior associate. In Charlotte, Miller Smith focuses her practice on structured finance and real estate finance after holding a position as associate. All appointments are effective 1 January 2019.

ILS

AXA XL's reinsurance operation has completed the acquisition of all third party ownership interests in its majority-owned asset management affiliate New Ocean. New Ocean is now a wholly-owned subsidiary within AXA XL's alternative capital business following AXA XL’s reinsurance operation. The firm will now fall under the leadership of Daniel Brookman, AXA XL's head of alternative capital. Brookman joined AXA XL in 2016 as svp of alternative capital and was promoted to lead the team in 2017.

Subprime auto ABS downgraded

S&P has placed its triple-B rating on the class B notes of Honor Automobile Trust Securitization 2016-1 on credit watch with negative implications and lowered its rating on the class C notes to double-C. The agency reports that CNLs have risen to approximately 27.2%, overcollateralisation (as a percentage of the collateral balance) has declined to zero as of 31 October (from 13.4% as of 30 June) and US$1.4m was drawn from the reserve account on the November distribution date to pay down the class A notes so that overcollateralisation would not turn negative. Westlake took over servicing of the transaction from Honor on 1 September, at which time many additional accounts were rolling into default status. This, coupled with Westlake's more standard approach to extensions, has contributed to the acceleration in losses during September and October.