Sector developments and company hires

Renewables JV inked
By way of a joint venture, illimity Bank and VEI Green II have set up a securitisation vehicle for distressed loans with underlying assets that produce electricity from renewable sources. This vehicle will invest up to €100m and operate in both the Italian primary and secondary energy markets. The partnership has commenced activities by carrying out its first operation on the Italian secondary energy market. This purchase involved a portfolio of loans that have photovoltaic systems as their underlying assets and a GBV of more than €14m, expire between 2027 and 2031 and are secured by the incentive tariff recognised by the Italian electricity service manager Gestore dei Servizi Elettrici. The aim of the transaction is to support the investments needed to return the systems to full productivity.

In other news…

Ares settles SEC charges
Ares Management has agreed to pay US$1m to settle SEC charges that it failed to implement and enforce policies and procedures reasonably designed to prevent the misuse of material nonpublic information. The SEC’s order finds that in 2016 Ares invested several hundred million dollars in a public company through a loan and equity investment that allowed Ares to appoint a senior employee to the company’s board. The order further finds that Ares’s compliance policies failed to account for the special circumstances presented by having an employee serve on the portfolio company’s board while that employee continued to participate in trading decisions regarding the portfolio company.

ARRC best practices
The Alternative Reference Rates Committee (ARRC) has published recommended best practices to assist market participants as they prepare for the cessation of US dollar Libor. The guidance suggests that new Libor cash products should include ARRC recommended, or substantially similar, fallback language as soon as possible and new use of USD Libor should stop. Further, third-party technology and operations vendors relevant to the transition should complete all necessary enhancements to support SOFR by the end of this year. Finally, for contracts specifying that a party will select a replacement rate at their discretion following a Libor transition event, the determining party should disclose their planned selection to relevant parties at least six months prior to the date that a replacement rate would become effective. Separately, Fannie Mae and Freddie Mac have launched new websites that provide key resources for lenders and investors as the GSEs transition away from Libor, as well as updates related to transitioning their credit risk transfer programmes and their CMOs.

CBL CMBS update
CBL Properties has become the first US mall operator since the start of the coronavirus pandemic to announce its intention to cooperate with lenders in foreclosure proceedings and/or to return keys on some malls in its portfolio. Three of these properties are in CMBS transactions rated by Fitch: the Park Plaza Mall in Little Rock, Arkansas; the Eastgate Mall in Cincinnati, Ohio; and Hickory Point in Forsyth, Illinois. The total Fitch-rated US CMBS conduit exposure to CBL-operated malls is 16 loans totalling US$1.06bn. As of the May 2020 remittance reporting, six of these loans (US$389m) were already with the special servicer and a forbearance request is currently being reviewed by the servicer for the US$63m Asheville Mall loan that remains with the master servicer.

North America
Mitchell Drucker has been named a partner in the Ares Credit Group, where he focuses on the group’s commercial finance platform. Drucker also serves as a member of the Ares Credit Group’s commercial finance investment committee. Prior to joining Ares, he was a partner at Garrison Investment Group, responsible for corporate finance investments in the firm's opportunity and direct lending funds group. Previously, he served in various capacities at the CIT Group. 

Onex Credit has hired Ronnie Jaber as head of structured products and Chad Valerio as portfolio manager for its opportunistic credit team. Jaber joins Onex Credit from The Carlyle Group, where he was md, co-head of structured credit and portfolio manager for global credit. Valerio joins from Oak Hill Advisors, where he was md and focused on stressed and distressed investments as portfolio manager. Jaber and Valerio will report to Stuart Kovensky and Jason New, co-ceos of Onex Credit. 

Upgrades for Grafton CRT
Moody's has taken positive rating actions on three tranches of an unexecuted unfunded CDS pertaining to Santander’s Grafton CLO 2016-1 capital relief trade. Together with affirming the tranche A notes at Aaa, the agency has upgraded the tranche B notes to Aaa from Aa3 and the tranche C notes to A3 from Baa3. The move reflects the significant amortisation of the portfolio since October 2019, leading to substantially increased credit enhancement for all the rated tranches. The April 2020 pool of performing assets has shrunk to £294.5m from £510.2m in October 2019 (albeit the portfolio was being managed to a replenishment level of £750m of performing par at that time). Moody’s notes that there is one reported credit event where the final loss has been determined.