Sector developments and company hires

RBS settles RMBS claims
The securities division of Maryland Attorney General Brian Frosh has entered into an US$18m settlement with RBS Financial Products, resolving claims that RBS misled investors in its issuance and underwriting of financial crisis-era RMBS. RBS offering documents for these transactions made representations that the underlying loans generally complied with the lender’s underwriting guidelines and applicable laws, and had certain loan-to-value ratios. However, due diligence reviews performed by RBS revealed that certain loans did not conform to these representations.

Further, third-party diligence vendors hired by RBS provided reports that graded a sample of loans and noted those that did not meet underwriting guidelines and lacked compensating factors, did not comply with applicable laws or were based on insufficiently supported appraisals. RBS often purchased and securitised loans that were not part of the diligence sample without additional review. At times, the lender even agreed with mortgage originators to limit the number of loan files it could review during its due diligence.

A description of these agreements with originators were not disclosed in the offering documents. The offering documents also did not disclose findings of the due diligence reports.

Eligible state agencies and local governments will be able to submit claims for reimbursement of losses as a result of the settlement.

Strategic partnership formed
Tikehau Capital and Churchill Asset Management have formed a strategic partnership to expand their respective cross-border direct lending footprints in Europe and the US. The partnership includes mutual investments by Tikehau Capital and Churchill investment funds, as well as closer cooperation on private credit investment opportunities in each manager’s respective market. The aim is to develop customised financing solutions to middle market private equity firms and their portfolio companies across the capital structure.