Sector developments and company hires

PHEAA investor forum formed
PHEAA has launched a series of consent solicitations seeking investor approval to amend the terms of indentures related to its outstanding tax-exempt bonds and notes issued by various PHEAA student loan ABS trusts, for which the organisation acts as administrator. The amendments would provide for the flexibility to sell the student loans pledged under certain indentures to the servicer at a higher percentage of the initial pool balance than is currently provided in the indentures and enable the proceeds to be used to retire the related series of bonds.

To facilitate the process, PHEAA has established a confidential online forum powered by DealVector that is designed to facilitate rapid and effective communication with and among investors in securities backed by federally guaranteed student loans. The new forum – which is free for investors - allows PHEAA to prioritise consent solicitations on trusts where investor demand is greatest and participation highest.

In the case of the PHEAA notes, the consent of holders representing at least a majority of the aggregate outstanding note principal balance is required to approve the optional purchase provisions in the indentures. In the case of the PHEAA Student Loan Trusts, the consent of noteholders representing 51% of the aggregate outstanding principal balance of the notes is required to amend such provisions.

In other news…

EMEA
KKR has appointed Michael Small as a partner in its European credit and markets team, with origination, execution and fundraising responsibilities for the private credit business. He will also help grow KKR’s global mezzanine strategy and sit on several of the firm’s credit investment committees.

Small will join KKR in mid-2021 from Park Square Capital, where he was a partner responsible for the sourcing and execution of private credit investments. Before joining Park Square, he served in Dresdner’s principal finance group and at Babcock & Brown.

Infrastructure loan MoU inked
Hong Kong Mortgage Corporation (HKMC) and MUFG Bank have signed a memorandum of understanding regarding an infrastructure loan sales framework, with the aim of facilitating loan sale cooperation between both parties. The MoU sets out the principal terms for potential infrastructure loan sales by MUFG to the HKMC, including the loan selection criteria, mode of sales and engagement process. This represents the first MoU that the HKMC has signed with a commercial bank and furthers the mandate of HKMC’s infrastructure financing and securitisation (IFS) business to fill the infrastructure financing market gap in the region.

Trade finance fund manager charged with fraud
David Hu, managing partner and cio of New York-based investment advisory firm International Investment Group (IIG), has pled guilty before US District Judge Alvin Hellerstein to investment adviser fraud, securities fraud and wire fraud offenses in connection with an over US$100m scheme to defraud IIG’s investment advisory fund clients and investors. From approximately 2007 to 2019, Hu conspired to: overvalue distressed loans held by the IIG funds; falsify paperwork to create a series of fake loans that were classified, fraudulently, as positively performing loans and to otherwise hide losses; sell overvalued and fake loans to a CLO trust and new private funds established and advised by IIG; and use the proceeds from those fraudulent sales to generate liquidity required to pay off earlier investors in a Ponzi-like manner.

The US$220m CLO, dubbed Trade Finance Funding I (SCI 11 February 2014), enabled IIG to hide losses and generate liquidity through the purchase of defaulted loans, distressed loans and fake loans from its portfolio. The CLO also entered into fake loan transactions with Panamanian shell entities.

In connection with his plea agreement, Hu has agreed to forfeit more than US$129m, representing proceeds traceable to the commission of the offenses.