Sector developments and company hires

Subprime auto performance eyed
Davis & Gilbert’s latest Credit Chronometer subprime auto study indicates that Covid-era market participants generally believe that the most reliable indicator of a subprime auto securitisation’s success is its projected performance - and they hold this belief even more strongly than in the past. The survey suggests that since 2019, the importance of credit ratings as a success factor has declined, perhaps indicating an emphasis and reliance by respondents on their own review of data in uncertain times. The second takeaway from the study is that, unsurprisingly, 81% of participants believe that the performance of subprime auto loans is likely to deteriorate. However, although expectations for deterioration are higher than in last year’s study, there is moderation of the pessimism - rather than panic - in every group polled. Of those who believe deterioration is likely, only 29% of participants believe it to be very likely in 2020, versus 38% who believed it was very likely in 2019.

In other news…

Merger
Garrison Capital is set to merge with Portman Ridge Finance Corporation (PTMN), a BDC managed by Sierra Crest Investment Management, which is an affiliate of BC Partners Advisors and LibreMax Capital. The transaction is the result of a review of strategic alternatives by Garrison and has been approved by a unanimous vote of the boards of Garrison and PTMN. PTMN will assume Garrison’s on-balance sheet CLO liabilities at the closing of the transaction. Based on the 31 March 2020 balance sheets, the combined company would have had total investments of approximately US$638.5m and a NAV of approximately US$207m.

MM CLOs on watch
Moody's has put nine tranches from seven middle market CLOs on review for downgrade - one rated Baa3, five rated Ba1 to Ba3 and three rated B1 or below. The tranches represent approximately 1.5% of Moody's US-rated MM CLOs.

North America
Two Harbors Investment Corp has appointed William Greenberg as president and ceo and Matthew Koeppen as cio. Thomas Siering will no longer serve as president and ceo, but will remain on the board as a non-independent director until the next annual meeting of the company’s stockholders. Greenberg has served as vp and co-cio of Two Harbors since January 2020, having previously served as co-deputy cio from June 2018. Prior to joining Two Harbors in 2012, he was an md at UBS, holding a variety of senior positions with responsibilities including managing the mortgage repurchase liability risk related to over US$100bn of RMBS and whole loans issued and/or sold by UBS. Koeppen has served as vp and co-cio of Two Harbors since January 2020, having joined the company in 2010. Prior to that, he held several key positions with Black River Asset Management, including managing its securitised products portfolio.