Sector developments and company hires

PEFF funds allocated
The steering body of the World Bank’s Pandemic Emergency Financing Facility (PEFF) has allocated US$195.84m to 64 of the world’s poorest countries with reported cases of Covid-19 to fund critical lifesaving medical equipment and support for health workers on the frontlines of the crisis. The allocation represents the amount received when the PEFF insurance window triggered for Covid-19 as reported by AIR Worldwide (SCI 14 April). At the time all trigger conditions were met, 4,653 cases - or 0.62% of reported Covid-19 cases globally - were from the world’s poorest countries that are members of the World Bank’s International Development Association. Specific funding allocations will be determined by population size and reported cases, with a minimum of US$1m and maximum of US$15m going to each country, and a heavier weight given to countries classified as fragile or conflict-affected.

RMBS on watch due to stop-advance feature
Moody's has placed 18 class B3 and B4 notes issued by 12 Sequoia Mortgage Trust prime jumbo RMBS on review for downgrade, affecting approximately US$46m of securities. These deals – SEMT 2015-2 through 2017-6 - feature a stop-advance mechanism, whereby the servicer does not advance principal and interest to loans that are 120 days or more delinquent. Moody’s notes that while stop-advance features may lessen potential cashflow disruptions upon advance recoupment and offer greater transparency on actual collections, in the affected transactions principal collections or liquidation proceeds cannot be used to pay interest on the bonds and there is no alternative source of liquidity to pay interest. As a result, in an environment where delinquencies and forbearance activities are expected to rise, this particular stop-advance feature can lead to a reduction in interest payment to these junior tranches. In addition, prepayments - which are a key source of build-up in credit enhancement in the transactions - are expected to slow materially in the next few months, exacerbating the sensitivity of the tranches to interest reductions.