Sector developments and company hires

CDS hire announced

Axiom Alternative Investments has appointed Bedis Gharbi as senior portfolio manager, to support the continued development and diversification of its growing London office and fund range. Gharbi brings over 20 years’ experience in the investment management industry, most recently as head of synthetic credit funds at RiverRock European Capital Partners. He will join Axiom’s London office, working with Laurent Henrio on the recently launched Axiom Credit Opportunity Fund.

CLO downgrade

Moody's has downgraded the rating on the following notes issued by Octagon Investment Partners XIX. The US$7.5m class F notes, downgraded to B3, from B2. Octagon Investment Partners XIX, issued in April 2014 and partially refinanced in March 2017 is a managed cashflow CLO. The downgrade rating action on the Class F notes reflects the specific risks to the junior notes posed by credit deterioration and par loss observed in the underlying CLO portfolio. Based on Moody's calculations, the weighted average rating factor (WARF) is at 2741 compared to 2546 in December 2018 and is currently failing its trigger level of 2441. Furthermore, the over-collateralization ratio for the Class F has fallen to 105.11% versus the December 2018 level of 105.42%.

Egyptian ABS sealed

The Arab African International Bank (AAIB) is lead advisor and one of the main arrangers on a EG6bn securitisation, issued by the Tameer for Securitization Company for a portfolio of receivables originated by the New Urban Communities Authority. This is one of the biggest securitisations in the region to date and completed in collaboration with the National Bank of Egypt, the Commercial International Bank, and EFG Hermes.

Micro-enterprise guarantee

Croatian micro-enterprises and start-ups looking to purchase small machinery and equipment worth up to €25,000 can benefit from the guarantee extended today by the EIF to UniCredit Leasing Croatia. EIF is providing the largest leasing company in Croatia with a guarantee to grow its leasing portfolio for micro-enterprises with a higher risk profile worth €10m in total.

The transaction is enabled by a guarantee from the EU budget, under the Investment Plan for Europe - the Juncker Plan - and its European Fund for Strategic Investments (EFSI), which allows the European Investment Bank Group to invest in more and often higher-risk operations.  

EIF and UniCredit Leasing Croatia’s partnership will allow Croatian micro-enterprises more competitive leasing terms from those currently available on the local financial market. With the EIF guarantee, UniCredit Leasing Croatia will be able to reduce collateral requirements for its micro-enterprise clients.

Spanish RMBS ruling mixed outcomes

Moody’s comments that Spanish RMBS exposed to IRPH-indexed loans, in the context of the advocate general of CJEU’s conclusion that Spain's use of Índice de referencia de préstamos hipotecarios (IRPH), an official mortgage reference index since the early 1990s, falls within the remit of EU directive 93/13/CEE. Such a conclusion, if affirmed by the CJEU, would allow Spanish courts to rule against IRPH's use on the grounds of it not being transparent to borrowers.

The rating agency adds that Szpunar's opinion, based on his view that the IRPH calculation method is complex and not transparent for the average consumer, increases the likelihood that the CJEU will rule against the use of the IRPH, opening the door to consumers’ claims against banks for a lack of transparency on the sale of IRPH-linked residential mortgages.

Of the 136 Spanish residential mortgage-backed securities (RMBS) the agency rates, 29 have exposure to IRPH-indexed mortgages in excess of 10% of their portfolio balance. Any future ruling against IRPH use would have an overall credit-negative effect on some of the portfolios exposed to these loans because these deals will sustain a reduction of available excess spread.

As such, Moody’s concludes that excess spread on some transactions will decline, a credit negative, and borrowers' affordability will improve, a credit positive.