Sector developments and company hires

Reporting template RTS published
Seven Commission Delegated and Implementing Regulations comprising the technical standards in connection with the details to be made available by the originator, sponsor and SSPE in a securitisation transaction subject to the Securitisation Regulation have been published in the EU Official Journal. Publication means that the reporting templates RTS will be effective on 23 September, after 20 calendar days have elapsed from the date of publication.

In other news…

Diversity strengthens CLO managers
A large proportion of CLO issuers manage loans outside of CLOs and those diverse loan platforms can strengthen managers' ability to weather slower periods of CLO issuance, according to new research from Fitch.

“Firms with diverse business models and established investment platforms are often well positioned in slowing markets to maintain consistent analytical staff levels through loan product reallocation/AUM retention,” the rating agency says. “Higher investment staff levels are typically associated with lower credits-per-analyst ratios and, in turn, more attention paid to individual loan assets, which can be supportive of higher returns over time.”

Recent results from Fitch's annual CLO Manager Handbook survey reveal that of the 114 participating firms, 87 reported managing some percentage of loan assets outside of CLOs, with responses ranging from less than 1% to 94%. Of these firms, 54 reported having at least 30% non-CLO loan AUM.

The largest non-CLO loan allocation was reported by large, traditional multi-channel asset manager Loomis Sayles at 94%, followed by middle-market boutique Brightwood Capital at 93%.

Litigation ABS vehicle established
Forbes Ventures has established a wholly owned UK subsidiary dubbed Forbes Ventures Cell 1 (SCI 2 March). The entity is set to acquire UK-issued litigation funding loans, through the assignment of the related receivables to Forbes Ventures CC 1, which is a Securitisation Cell Company in Malta.

The Maltese Cell will shortly be issuing a prospectus relating to the proposed offer of two-year bonds and their admission to trading on the Malta Stock Exchange. The offer has an aggregate value of €35m.

Forbes Ventures Investment Management (FVIM) acts as originator and collateral agent for the UK Cell and is responsible for the selection and oversight of the securitised assets. FVIM will receive a cash fee for this transaction, upon closing, equivalent to 2% of the funds raised in the offer.

The company intends to use the infrastructure that it has established for this securitisation to facilitate the securitisation of both further litigation funding and other assets across a range of industries. Indeed, it is in discussions with multiple prospective counterparties from whom it may purchase assets for this purpose.

NCSLT ruling welcomed
Vice Chancellor Joseph Slights of the Court of Chancery for the State of Delaware last week ruled that a private equity founder has no current beneficial interest in and little current control over US$15bn in student loan securitisations in the consolidated litigation related to the case of CFPB versus National Collegiate Student Loan Master Trusts. In the ruling, Judge Slights clarified the roles and duties of many of the parties involved, but also acknowledged that the decision would not be able to resolve everyone’s questions.

"The recent opinion from the Delaware Chancery Court regarding NCSLT deals marks a positive development in resolving ongoing legal disputes between several transaction parties and appears to favour the indenture parties, including the indenture trustee and the noteholders,” notes Moody's vp Jinwen Chen. “However, the court opinion has not resolved all the disputes raised, so more clarity will be forthcoming. Meanwhile, ongoing legal disputes between the CFPB and NCSLT remain unresolved."

RV performance pressure
An increase in used vehicle supply in the latter half of 2020 is expected to place downward pressure on residual value (RV) performance in auto lease ABS, Fitch notes. Wholesale activity has picked up with auctions coming back online following lockdown closures, the lifting of moratoriums on repossessions and the market now operating at pre-coronavirus levels. Furthermore, captives and other auto lenders discouraged lease returns in April and May, pushing those returns out to 2H20. Returned residuals were over 50% higher in the July reporting period than in the June reporting period and increased further in August.