Company hires and sector developments

Euro advisory firm boosts SF expertise

Zedra has hired Rens van Hoof as head of capital market solutions out of its Amsterdam offices. He has a range of experience covering special purpose vehicles for securitisation, structures for bond issues and commodity trade finance, as well as private equity, real estate and investment funds to serve financial institutions, asset managers and large corporate firms.

Fed finalises risk rules

The US Federal Reserve Board has finalised rules that tailor its regulations for domestic and foreign banks to more closely match their risk profiles. The rules reduce compliance requirements for firms with less risk while maintaining the most stringent requirements for the largest and most complex banks.

The rules establish a framework that sorts banks with US$100bn or more in total assets into four different categories based on several factors, including asset size, cross-jurisdictional activity, reliance on short-term wholesale funding, nonbank assets, and off-balance sheet exposure. Significant levels of these factors result in risk and complexity to a bank and can in turn bring risk to the financial system and broader economy.

While generally similar to the proposals released for comment over the past year, the final rules simplify the proposals by applying liquidity standards to a foreign bank's U.S. intermediate holding company (IHC) based on the risk profile of the IHC, rather than on the combined U.S. operations of the foreign bank. Additionally, for larger firms, the final rules apply standardized liquidity requirements at the higher end of the range that was proposed for both domestic and foreign banks. The Board estimates that the changes in the aggregate will result in a 0.6% decrease in required capital and a reduction of 2% of required liquid assets for all banks with assets of US$100bn or more. The rules do not reduce capital or liquidity requirements for firms in the highest risk categories, including US global systemically important banks.

Libor transition tax relief proposed

The US Treasury and the Internal Revenue Service today issued proposed regulations allowing taxpayers to avoid adverse tax consequences from changing the terms of debt, derivatives, and other financial contracts to replace reference rates based on interbank offered rates (IBORs) with certain alternative reference rates. The proposed rules respond to a request for guidance from the Alternative Reference Rates Committee (ARRC), a broad-based committee of private sector and ex-officio government stakeholders convened by the Board of Governors of the Federal Reserve System in advance of the expected market transition from IBORs to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York.

These proposed regulations address the possibility that modifying a debt instrument, derivative, or other financial contract to replace a reference rate based on an IBOR could be a taxable transaction for Federal income tax purposes or could result in other tax consequences.  Without this critical guidance, market participants would face significant tax uncertainties in making necessary modifications to these contracts.

Interested parties are invited to submit written comments on the proposed regulations through 25 November, 2019.

Resi acquisition announced

Redwood Trust is to acquire CoreVest American Finance Lender, a nationwide US originator and portfolio manager of business-purpose residential loans (BPLs), and several of its affiliates, from certain affiliates of Fortress Investment Group's credit funds business and CoreVest Management Partners. The acquisition includes the CoreVest operating platform and over US$900m of related financial assets. Collectively, the platform and assets will significantly expand Redwood's presence in the BPL market, furthering its position as a leading private-sector source of housing-market liquidity. Importantly, the transaction also advances several of Redwood's key corporate strategic initiatives, including broadening and diversifying its revenue streams, significantly expanding its capacity to create proprietary credit investments, and profitably scaling its infrastructure and operations.

Under the terms of the agreement, Redwood will acquire CoreVest's operating platform and assets – including its business-purpose loan portfolio and subordinate bonds from CoreVest-sponsored securitisations – from the Sellers. Consideration for the acquisition is approximately US$490m, net of in-place financing on the financial assets. Redwood plans to fund this transaction with a mix of cash on hand and shares of Redwood stock. The Redwood shares are payable to the CoreVest executive management team and vest over a two-year period.