Sector developments and company hires

Agency acquisition

Morningstar has entered into a definitive agreement to acquire DBRS, the world’s fourth-largest credit ratings agency, for a purchase price of US$669m. The combination of DBRS with Morningstar Credit Ratings’ US business will expand global asset class coverage and provide an enhanced platform for providing investors with leading fixed-income analysis and research. Morningstar intends to fund the transaction with a mix of cash and debt, which will include the placement of a new credit facility at closing. The transaction is expected to be accretive to net income per share in the first fiscal year after completion with an estimated closing in the 3Q19, subject to regulatory approval and customary closing conditions.

GACS extension approved

The European Commission has approved, under EU State aid rules, the third extension of the GACS scheme (to 27 May 2021) to facilitate the securitisation of non-performing loans. The scheme was initially approved in February 2016 and last extended in August 2018 (SCI 5 September 2018). Between February 2016 and November 2018, the scheme was accessed 17 times, removing €51bn (gross book value) of NPLs from the Italian banking system - which corresponds to almost two-thirds of the total reduction of non-performing loans in Italy during that period. The Commission's assessment showed that, under the scheme, the State guarantees on the senior notes will continue to be remunerated at market terms according to the risk taken – in other words, in a manner acceptable for a private operator under market conditions.

Homogeneity RTS released

The European Commission has published the delegated act for the regulatory technical standards (RTS) on homogeneity, a key requirement in the STS securitisation framework. The final text is similar to the standard developed by the EBA, according to Rabobank credit analysts, with some small differences. The RTS states that underlying exposures shall be deemed to be homogeneous where they: correspond to one of eight asset types (including residential and auto loans/leases, and credit card receivables); are underwritten in accordance with standards that apply similar approaches for assessing associated credit risk; are serviced in accordance with similar procedures for monitoring, collecting and administering cash receivables on the asset side of the SSPE; and one or more of the homogeneity factors are applied. The act will only go live once published in the official journal.