Sector developments and company hires

ECB stimulus package outlined

The ECB has announced that it is cutting the interest rate on the deposit facility will be decreased by 10 basis points to -0.50%. The interest rate on the main refinancing operations and the rate on the marginal lending facility will remain unchanged at their current levels of 0.00% and 0.25% respectively.  Additionally, net purchases will be restarted under the asset purchase programme (APP) at a monthly pace of €20bn as from 1 November 2019. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. Additionally, the modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III) will be changed to preserve favourable bank lending conditions, ensure the smooth transmission of monetary policy and further support the accommodative stance of monetary policy. Finally, in order to support the bank-based transmission of monetary policy, a two-tier system for reserve remuneration will be introduced, in which part of banks’ holdings of excess liquidity will be exempt from the negative deposit facility rate.

RaboBank’s analysts note that, as for the ABSPP, it is a very small part of the overall APP and net purchases are potentially only some €0.1bn a month. As such, redemption flows continue to be the most important factor as they total some €6.6bn (~25% of the portfolio) in the next 12 months.  The analysts add: “As it stands currently, the ECB is already failing to keep their ABSPP portfolio steady, let alone grow it further (however marginal the net increase actually is). Hence, no pullback by the ECB in the ABS market is expected.”

Key man replaced

Neel Doshi has replaced Donald Pollard as key person under the investment management agreement for CVP CLO 2017-1 and 2017-2, as well as CVP Cascade CLO-1 and CLO-2. The holders of a supermajority of the controlling class of notes issued by these transactions may object to the replacement key person by 4 October.

Multifamily purchase

KBRA received a notification on 10 September from Wells Fargo, the trustee on LNCR 2018-CRE1, regarding the collateral manager’s (LoanCore) exercise of its right to purchase the West 107th Street and 471-476 Central Park West collateral out of the CRE CLO trust at their respective par purchase prices of US$85.2m and US$35.6m. The purchase occurred as the loans became 60-plus days delinquent and transferred to the special servicer, having been reported 30-plus days delinquent during the August remittance period. If the loans are not purchased within 45 days, the note protection test may fail, causing a mandatory redemption of some portion of the class A notes to be paid from interest proceeds. Both loans are collateralised by multifamily assets located in New York City, a large number of which are rent-stabilised/rent-controlled units where the borrowers’ business plans included converting some to market rent apartments. However, KBRA notes that the Housing Stability and Tenant Protections Act of 2019 – passed on 14 June - dramatically reduces the ability of New York City landlords to increase rents on such property.

SFA appointment

The Structured Finance Association (SFA, formerly SFIG) has appointed Leslie Sack, head of government relations at SFA, as executive director of the Structured Finance Foundation. Established in 2016, the Structured Finance Foundation partners with Scholarship America and Mentor Foundation USA to develop and provide scholarship programs for the young people engaged in the Mentor Foundation’s programs. Since its inception, the Structured Finance Foundation has awarded 29 students nearly $500,000 in scholarships.  Sack takes over the role of from Sairah Burki, who was recently named md and head of policy at the SFA.