Sector developments and company hires

ADI securitisation review underway
The Australian Prudential Regulation Authority is undertaking a review of securitisation practices, having recently identified repurchased residential mortgage loans at some authorised deposit-taking institutions that were subject to repayment deferral from their securitisations. In APRA’s view, this represents implicit support, which is inconsistent with Prudential Standard APS 120 Securitisation. APS 120 requires ADIs to be clearly separate from their securitisations and to permanently (except in limited pre-defined circumstances) transfer credit risk to the securitisation investors. 

Consequently, APRA has required the ADIs that it considers to have provided implicit support to publicly disclose their repurchases as part of upcoming Pillar 3 reporting requirements. They will also be required to have a third party review their programme’s APS 120 compliance and mitigate any findings prior to further securitisation issuance.

Based on these findings and engagement with industry stakeholders, APRA believes it is necessary to conduct a programme of securitisation thematic reviews, which will continue into 2021. 

Depending on the findings, the reviews may be expanded further. Identification of non-compliance with APS 120 may result in an ADI being required to publicly disclose their non-compliance and/or a requirement to hold additional regulatory capital.

Deficiencies already identified by APRA as part of its thematic reviews include: little or no procedures or controls to challenge or provide oversight of ongoing securitisation operations; requirements for ADIs to repurchase loans from their securitisations under certain circumstances; and considering capitalising interest to be a further advance and insufficiently considering the provision of implicit support.

EMEA
CVC Credit Partners has appointed John Empson as partner and co-head of private credit and Miguel Toney as a partner in the private credit team. Empson joins from Blackrock, where he was head of capital markets, EMEA. Prior to Blackrock, he was a partner at KKR, where he spent 11 years helping with the strategic build-out of the firm's credit and markets platform.

Toney joins from Park Square Capital, where he was a partner focused on the firm’s European junior capital strategy. Prior to this, he was an md at MV Credit, where he helped build out its European junior capital and senior debt capabilities.

Equity transfer agreed
The owners of Gravis Capital Management have agreed to sell 70% of the firm’s issued shares to ORIX Corp through the transfer of common equity. The transaction is expected to close during 1Q21 and, on completion, existing management teams and day-to-day operations will remain in place, supported by ORIX. Houlihan Lokey served as the financial advisor to Gravis and assisted in structuring and negotiating the transaction.

ESAs clarify STS impact
The Joint Committee of the European Supervisory Authorities (ESAs) has clarified the impact of Brexit on the STS framework. The committee states that existing STS transactions with a UK originator or SPV will cease to be STS in the hands of EU investors from 1 January. ESMA intends to remove all UK STS deals from its list by 1 January, irrespective of whether originators notify it.

North America
Susan Gueli has joined Common Securitization Solutions (CSS) as chief technology officer, evp and a member of the CSS executive committee, reporting to ceo Tony Renzi. Gueli is responsible for all technology initiatives for the company, developing and implementing all aspects of the Common Securitization Platform and its data offering. She was previously chief technology officer of Nationwide's program & application services, where she led in-house application development, digital transformation, shared services and a team of more than 3,000 IT professionals.

Sabal Capital Partners has hired Edward Hussey as head of agency lending. Based in Virginia, he will be responsible for managing production across all of Sabal’s Freddie Mac, Fannie Mae and other agency products. He will also oversee the recruiting, training and management of Sabal’s nationwide production team. Hussey joins Sabal from Truist Bank, where he was svp, head of multifamily production for agency lending.

Online lender expands into autos
Pagaya has expanded its consumer credit offering into auto loans, with hundreds of millions of dollars already invested in the space and multiple lending partners - including Flagship Credit Acceptance and Foursight Capital – signed up. In addition to unlocking new opportunities for marketplace lenders, the move enables Pagaya to work with original equipment manufacturers (OEMs) and their wholly-owned captive finance companies to bring more borrowers into their ecosystem.

The effort is led by Robert McDonald, the firm’s new general manager of auto finance. He was previously vp, head of auto and equipment - structured finance at Goldman Sachs.

RMBS upgraded on PDL correction
Moody's has upgraded from Ba2 to Ba1 the rating of the class E notes issued by Avon Finance No 1. The move is prompted by the correction of an input error in the cashflow model related to the transaction’s principal deficiency ledger mechanism that meant the principal residual certificates were not captured properly. The agency notes that during the original assignment of the ratings, the omission of the PDL mechanism for the principal residual certificates meant the modelled waterfall did not fully reflect all transaction features.