Sector developments and company hires

Australian livestock deal debuts

StockCo has launched the first securitisation warehouse transaction in Australia consisting of financing receivables primarily secured by livestock. The transaction has been completed with Goldman Sachs and the facility will be available for three years and will be able initially to accommodate up to US$150m of livestock receivables subject to pre-agreed eligibility criteria, and will replace a substantial portion of StockCo’s existing senior debt club facilities, with a view to providing a pathway to funding further growth in StockCo’s business. StockCo expects the facility to increase in the short to medium term as StockCo continues to grow its livestock funding business in the Australian market.

Compliance deficiencies flagged

Deer Park Road Management Company has agreed to pay a US$5m penalty to settle US SEC charges stemming from compliance deficiencies that contributed to the firm’s failure to ensure that certain securities in its flagship MBS fund were valued properly. The firm’s cio Scott Burg agreed to pay a US$250,000 penalty. An SEC investigation found that Deer Park Road’s flagship STS Partners’ fund failed to have policies and procedures to address the risk that its traders were undervaluing securities and selling for a profit when needed. The firm also failed to guard against its traders’ providing inaccurate information to a pricing vendor and then using the prices it got back to value bonds. Burg oversaw the valuation of certain assets in the flagship fund and approved valuations that the traders flagged as “undervalued”, with notations to “mark up gradually.” Also overseeing valuation was a committee comprised of the principal’s relatives and others without relevant expertise. Without admitting or denying the findings in the SEC’s order, Deer Park consented to a censure and Deer Park and Burg agreed to cease and desist from committing or causing any violations and future violations of a provision of the Investment Advisers Act requiring reasonably designed policies and procedures.

RFC on catastrophic risk

Fitch is requesting feedback on proposed changes to its US RMBS loan loss model criteria, including updating its approach to catastrophic risk. The agency is proposing to adjust the property value of each loan by its exposure to catastrophic risks, which will affect borrowers’ sustainable LTV ratio and consequently influence both probability of default and loss severity model calculations. If this update – along with the other proposals – is implemented, the impact on mortgage pool loss projections is expected to be relatively modest and result in no rating changes. However, Fitch estimates that 90 outstanding classes of notes currently benefiting from positive rating pressure may take longer to realise upgrades as a result of the changes, as they generally have high geographic concentrations in areas with catastrophic risk or have higher concentrations of loans with small property values. Feedback is invited by 5 July.