Sector developments and company hires

CLO business integrated
RBC’s US-based CLO management business is being integrated into BlueBay’s CLO management platform. Sid Chhabra, who joined BlueBay – which is owned by RBC - in 2018 to build the firm’s structured credit and CLO capabilities, will lead this team. The US-based team includes four experienced individuals and the US$500m CLOs they manage.

In other news…

Counterparty risk hits
Fitch has downgraded 20 tranches from across 15 Spanish RMBS, reflecting the recent corresponding rating downgrade of Societe Generale (the SPV account bank provider for the deal) from single-A to single-A minus, as the RMBS ratings are capped by the bank rating. Thirteen of the tranches have been removed from rating watch negative, while the other seven tranches remain on RWN. The affected tranches are exposed to excessive counterparty risk, as a very material component of each tranche's credit enhancement (CE) protection is provided by the cash reserves held by the account bank. The RWN on the remaining seven tranches of seven Spanish RMBS reflects the high probability of downgrade as a result of the coronavirus pandemic, due to insufficient CE to compensate for additional projected losses on the portfolios.

Investment strategy rebalanced
Chenavari Toro Income Fund is enhancing its dividend policy (targeting a quarterly dividend yield of 2.5% and quarterly special distributions of available excess cash) and rebalancing its investment strategy, with the aim of reducing the discount between the company's share price and the net asset value per share. The latter will focus on liquid and tradable European ABS and CLO securities, through the company's existing opportunistic credit strategy. Consequently, it will cease to make new investments in illiquid assets through its current originated transactions and private asset-backed strategies, but will continue to support existing illiquid assets with a view to maximising shareholder value. The company will seek to realise its illiquid assets and redeploy the proceeds into liquid and tradable European ABS and CLOs if the opportunity arises.

JCP exposure gauged
JCPenney has revealed the names of 154 stores slated for closure, representing about 60% of the total store closures planned as part of its bankruptcy. Trepp calculates that 27 US CMBS loans (or loan pieces) have exposure to the 154 stores, totalling US$1.75bn in outstanding balance - although US$519.7m comes from a portfolio loan, for which only one of many properties backing the loan has JCPenney exposure. The largest loan with exposure is the US$105.8m Arbor Place Mall securitised in JPMCC 2012-C6: JCPenney is a collateral tenant with just under 15% of the space.

Loan repurchase mulled
The Finsbury Square 2017-2 issuer has disclosed that various discussions have been held with Kensington Mortgage Company (in its capacity as indirect holder of the RMBS certificates) in relation to the purchase of the loans in the mortgage pool. These may lead to the redemption of the notes (on or after the September 2020 interest payment date, which is the call option date), although the issuer notes the discussions are ongoing and preliminary in nature.

North America
Jonathan Kitei has joined the leadership team at Nearwater Capital as senior md and head of its risk retention financing business. Previously md and head of US securitised products distribution and global CLO distribution at Barclays. Before that he held senior loan sales and trading positions at Lehman Brothers, SunTrust and Bank of America. He also served on the board of the LSTA for six years, including two years as chair.