Sector developments and company hires

CDS trends discussed

Mayer Brown has commented on trends in single-name CDS credit event determinations. It notes that the Sears CDS case cited “numerous examples of commercial practice and legislative history in support of the decision [and] raises serious questions as to the degree to which the determination committees (DCs) are (and will in future determinations be) influenced by such factors.” It adds that this poses the question: “how will the DC reconcile the position where a conflict arises between the commercial purpose of the CDS market and the ordinary legal interpretation of the contract?”

Mayer Brown comments that, as with the Sears case, it seems “likely that commercial considerations played a part in the outcome of the Ziggo determination.” The firm adds that, some in the market might suggest the DC process should give more weight to the intended purpose of the product than a court might and try to avoid outcomes that may seem unfair or unusual. However, the law firm notes that “for lawyers trying to provide guidance to their clients on the interpretation of their contracts, weaving contract law with the emerging CDS lore presents a significant challenge.”

CLO partnership

HalseyPoint Asset Management has formed a partnership with A-CAP, a privately held company affiliated with multiple insurance and financial businesses, to support HalseyPoint's launch and ongoing operations. The founders of HalseyPoint, Lynn Hopton and Yvonne Stevens, will contribute to the company's working capital alongside A-CAP and certain of its affiliates, which will also provide significant equity and debt capital investments to anchor HalseyPoint's initial slate of CLOs. Additionally, A-CAP will extend additional services to HalseyPoint and ongoing support for the issuance of future CLOs. Hopton and Stevens will manage HalseyPoint's operations, as well as its investment process and credit committee. They are both 25-year veterans of the institutional leveraged loan and CLO markets, and previously served as co-heads and senior mds of Columbia Management’s leveraged debt group.

Fraud investigation

Law firm Pomerantz is investigating claims on behalf of investors in Domino's Pizza, concerning whether Domino's and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. The move follows a recent report on the franchisee community website Blue MauMau that a whistleblower report filed with the US SEC details how Domino's allegedly forced and orchestrated an unapproved advertising and promotion increase to franchisees in order to pay a US$1.85bn securitisation transaction with a new partially funded US$1.67bn securitisation debt owed to securitisation entities. The report contends that in return, Domino's Pizza's ceo, board members, officers and employees “could enjoy higher stock prices and dividends through share repurchases and dividend payouts”. Following publication of the Blue MauMau report, Domino's stock price fell sharply during intraday trading yesterday (20 February).

RMBS discussions

The Finsbury Square 2016-1 RMBS issuer has disclosed discussions with the Northview Group in relation to the purchase of the loans in the underlying mortgage pool. Such discussions may lead to the redemption of the notes, although it states they are ongoing and preliminary in nature. If the deal is not called, the margin step-up for the senior tranche is x1.5.