Sector developments and company hires

ILS restructuring agreed

Ballantyne Re has entered into a lock-up support agreement with Ambac Assurance UK, Assured Guaranty, approximately 82% by value of the class A noteholders, Security Life of Denver Insurance Company (SLD) and Swiss Re Life and Health America (SRLHA) in connection with a proposed restructuring transaction in respect of its obligations under the ILS notes. The key features of the restructuring include: novation of the indemnity reinsurance agreement between Ballantyne and SLD to SRLHA; disbursement of the assets from Ballantyne's reinsurance trust account to effectuate the novation and pay class A noteholders; commute the financial guarantees provided by Ambac; and preserve claims under the financial guarantees provided by Assured Guaranty. The restructuring will be implemented through a scheme of arrangement under Part 9 of the Irish Companies Act 2014, requiring the consent of a majority of class A noteholders, following which Ballantyne will be wound-up by way of a solvent liquidation. The transaction experienced around US$1bn of losses between May 2006 and October 2008 - as approximately 95% of its proceeds was invested in subprime and Alt-A RMBS – and its class C notes were contractually written-down as a result, while there is no economic value attributable to the class B notes (SCI 30 July 2013). Class A noteholders are expected to be paid approximately 51% of par, with an additional cash payment of 17.4% to each class A2a noteholder and 14.5% to each class A3 noteholder, plus a deferred consideration of up to 1%. The lock-up fee is 1.25% of the par value of the notes held by each consenting noteholder.

Law firm bulks up

Allen & Overy has promoted Suril Patel to partner within its CLO practice in London.

Partnerships

Moody’s Analytics and European DataWarehouse are partnering to help originators and sponsors of ABS comply with select transparency requirements under the Securitisation Regulation (EU) 2017/2402 (The Regulation). The Regulation requires originators and sponsors to meet disclosure requirements for public securitisations to be eligible for the STS designation through notification to securitisation repositories. Originators and sponsors will now be able manage their STS disclosure requirements through the joint effort of European DataWarehouse and Moody’s Analytics.

Sub-prime penalty levied

General Electric has been ordered to pay a civil penalty of US$1.5bn to resolve claims involving subprime residential mortgage loans originated by WMC Mortgage (WMC), a GE subsidiary, after WMC was acquired by GE in 2004. WMC, GE, and their affiliates allegedly misrepresented the quality of WMC’s loans and the extent of WMC’s internal quality and fraud controls in connection with the marketing and sale of residential mortgage-backed securities (RMBS).