Sector developments and company hires

Alternative CLO ETF announced
Alternative Access Funds (AAF) has announced the registration of its new AAF First Priority CLO Bond ETF, which is scheduled to become effective on 14 August and - if all approvals and launch objectives are met - begin trading in early September under the ticker ‘AAA’. The new ETF will focus its investments in US dollar-denominated first-priority triple-A rated CLO tranches, with the aim of delivering returns consistent with the general triple-A rated BSL CLO universe. The ETF's investment objective is to seek capital preservation and income, and it will be managed by AAF founder Peter Coppa alongside partners Todd Themistocles and Steve Kim.

In other news…

Acquisition
Intercontinental Exchange is set to acquire Ellie Mae, the cloud-based platform provider for the mortgage finance industry. The transaction values Ellie Mae at approximately US$11bn. The deal - following ICE’s acquisition of a majority stake in MERS in 2016, purchasing the remainder in 2018 and acquiring Simplifile in 2019 – aims to establish ICE, through its growing ICE Mortgage Services network, as the leading provider of end-to-end electronic workflow solutions serving the US residential mortgage industry. The transaction is expected to close in Q3 or early Q4 of 2020, following the receipt of regulatory approvals and the satisfaction of customary closing conditions.

Hotel SASB CMBS ratings ‘unlikely’
Significant hotel sector performance deterioration as a result of the coronavirus pandemic and recession make the assignment of ratings to new US CMBS single-asset/single-borrower (SASB) hotel transactions unlikely at this time, Fitch says. The agency says that the duration of the pandemic is uncertain, which limits the visibility of short-term performance and precludes the assignment of stable outlooks. Fitch currently maintains rating watch negatives (RWNs) on all classes of rated SASB hotel transactions.

Through June 2020, US hotel RevPAR, on a TTM basis for hotels that are open, is down 22.1% since February and 21.7% for the same time last year. This exceeds the peak-to-trough RevPAR decline observed of approximately 18.7% from May 2008 to May 2010 during the great recession.

Fitch anticipates that US RevPAR will drop by more than 45% in 2020 and then partially recover in 2021 to 80% of prior cycle peak levels, assuming economic conditions are consistent with its global economic outlook. From there, it assumes a 7% per annum recovery pace, which is slightly lower than the average of the prior two downturns.

Negative outlook for FFELP SLABS
Fitch has revised its rating outlook to negative from stable on 362 US FFELP student loan ABS tranches rated triple-A. The move follows its revision of the outlook on the US sovereign rating to negative on 31 July, due to the ongoing deterioration of US public finances and the absence of a credible fiscal consolidation plan. The affected classes represent approximately US$57bn in outstanding bonds.

North America
Figure Technologies has named former Morgan Stanley securitised lending global head Bob Hershy as head of Figure debt capital markets, part of the merchant banking effort the firm launched last year. Hershy retired from Morgan Stanley in January 2019. Figure has originated, closed and funded more than US$1bn in HELOCs, student loan refinances and mortgages on its Provenance blockchain platform.