Sector developments and company hires

‘Unique’ CMBX reflects Covid trends
The IHS Markit CMBX.14 index is expected to launch on 25 January, uniquely referencing 25 conduit CMBS issued between September 2019 and December 2020. All five of the 2019 deal constituents are also referenced in CMBX.13, creating collateral overlap between the two series.

Morgan Stanley CMBS strategists note that on average, CMBX.14's original credit enhancement is 29bp, 52bp, 31bp and 59bp higher than CMBX.13, CMBX.12, CMBX.7 and CMBX.6 respectively. By comparison, it is lower than CMBX.10 to CMBX.8 by an average of 35bp, 84bp and 74bp respectively. CMBX.14 tranches are also thinner than all other series of the index, on average.

Meanwhile, underwritten credit metrics are stronger relative to CMBX.13, with a Top 10 LTV of around 55% and an NOI debt yield of 10.6%. “Our measure of 'pro forma' underwriting improved versus CMBX.13 and remains favourable when compared to Series 12 and 11,” the Morgan Stanley strategists observe.

Finally, CMBX.14's concentration in properties located in the top 25 MSAs increased slightly to 63.1% compared to 62.2% for CMBX.13, and remains elevated relative to older indices. Office and multifamily concentration rose to 31.4% and 16.5%, while lodging and retail declined to 4.4% and 16.2% respectively. Indeed, CMBX.14 currently has the lowest concentration of lodging and retail properties across all CMBX series.

In other news…

EMEA
Jan Petersen is set to succeed Michael Curtis as head of corporate credit at MeDirect Bank, based in its London office (SCI 20 January). Petersen has over 20 years of experience in the European corporate loan markets, most recently in special situation lending at NatWest Markets in London.

Prior to that, he worked in the private credit group of Deutsche Bank and before that built and managed a €3bn loan portfolio for BAWAG in Austria. He has also worked in the direct lending area of Cerberus Capital Management and the leveraged finance area of RBS, in each case based in Frankfurt.

First post-Covid aircraft ABS prints
Castlelake has priced Castlelake Aircraft Structured Trust 2021-1, its seventh aircraft ABS and the first such transaction to be completed since the beginning of the Covid-19 pandemic. Proceeds from the US$595m transaction will be used to finance a diversified portfolio of 26 commercial passenger aircraft and one freighter, on operating leases with 11 different lessees in 10 different countries. The aircraft in the portfolio have a weighted average age of 9.3 years and a remaining lease term of approximately 7.8 years, with no scheduled remarketing in the first two years of the deal.

CLAS 2021-1 features several structural enhancements designed to address some of the challenges of the current environment, including an equipment note-style structure that allocates advance rate and amortisation on an asset-by-asset basis, expanded covenants, lower starting leverage, faster amortisation and increased cash sweeps. The deal comprises two tranches: US$476m class A notes, which priced at 3.474% (yielding 3.5%); and US$119m class B notes, which priced at 6.656% (yielding 6.75%). Moody's - in its first aircraft ABS rating in over a decade - has indicated the class A notes will be rated A2 and the class B notes will be rated Baa2, while KBRA has indicated the notes will be rated single-A and triple-B respectively. 

With this deal, Castlelake has sponsored approximately US$5.3bn in aircraft ABS since beginning the programme in 2014. The firm says that the class A and B notes of all four of its outstanding transactions are outperforming and ahead of their repayment schedules by an average of 6.5%, as of December 2020.  

Goldman Sachs was the lead structuring agent and left lead bookrunner on the transaction.

North America
Varagon Capital Partners has named Edward Kung as an md in the business development and investor relations team. Previously, Kung was head of business development at Evolution Credit Partners, marketing its direct lending and opportunistic credit funds. Prior to that, he was an md at Barings and has also held roles with PanAgora Asset Management, Columbia Management Group and Russell Mellon Analytical Services. 

Transitional CRE venture
Lionheart Strategic Management has entered into a loan acquisition agreement with Schroder Investment Management North America, targeting US$250m in transitional and distressed real estate credit investments. The venture will co-originate transactions and source and service loan opportunities through Lionheart Real Estate Credit Strategies.