Sector developments and company hires

CMBS secured, unsecured sub debt weighed
Senior US CMBS loans with unsecured subordinate debt (such as mezzanine or preferred equity) show significantly lower default rates than senior loans with secured subordinate debt (such as B-notes) at comparable leverage points, according to Fitch. The agency evaluated the performance of 1,001 senior CMBS conduit loans with subordinate debt in place, issued between 2003 and 2008, and found that for loans with mid-range leverage, the default rate for senior loans with unsecured subordinate debt is 25% lower than for loans with secured subordinate debt. Similarly, total realised loss rates for senior loans with unsecured subordinate debt were lower at each leverage category than for loans with secured subordinate debt. For loans with mid-range leverage (70%-80% total debt issuer LTV), realised losses on senior loans with unsecured subordinate debt totalled 1.8%, compared with 6.1% for loans with secured subordinate debt. The default rate on all senior loans with in-place subordinate debt was more than 55% higher than for loans without any subordinate debt.

North America
Kennedy Lewis Investment Management has hired Dik Blewitt as a partner and head of tactical opportunities. Blewitt was previously an md at GSO Capital Partners, focused on structured finance and credit investments. While at Blackstone, he was a senior portfolio manager for Carador Income Fund, as well as a member of the global structured credit investment committee for the firm's liquid credit business. Prior to joining Blackstone in 2014, he worked at Blackrock, R3 Capital, Lehman Brothers, Bank of America and JPMorgan.

RFC on RMBS approach
Fitch is requesting feedback on an exposure draft of its US RMBS coronavirus-related analytical assumptions criteria that will be used during the duration of the current economic crisis when rating US RMBS. Key changes proposed in the exposure draft include: a higher economic risk factor (ERF) floor in Fitch's loss model to better capture the projected economic disruption; minimum delinquency assumptions for new ratings during the first six months of the projection before reverting back to Fitch's model-derived projection; and a 20 point increase to the pool's current delinquency pipeline for outstanding transactions for a six month period before reverting back to Fitch's model-derived delinquency projection. If implemented as proposed, the agency expects the impact on mortgage pool loss projections to be relatively modest and concentrated in the non-investment grade rating categories. Comments on the approach are invited by 15 May.