Sector developments and company hires

NPL SRT agreement inked
Hoist Finance has signed a co-operation agreement with Magnetar Capital that provides for new portfolio investments on a pan-European level and will create a framework for future purchases in the current regulatory environment. The aim is to make securitisation an integral part of a sustainable business model for Hoist and strengthen its purchase capabilities.

The programme is structured with a view to achieving significant risk transfer and will target unsecured non-performing loan portfolios, for a total investment volume of approximately €1bn. As co-investor, Magnetar has committed to invest €150m in mezzanine and junior notes in future securitisations for a combined IRR of 14% over a 24-month investment period. Hoist Finance will subscribe to the senior notes.

Any surplus collections from the securitised assets will support the outstanding notes and, upon full repayment, be paid to Hoist under the relevant servicing agreements. The partnership will cover all the jurisdictions where the firm is active.

Hoist Finance (London branch) and Deutsche Bank acted as arrangers in designing the programme. White & Case acted as legal advisor to Hoist Finance and Clifford Chance as legal advisor to Magnetar.

In other news…

EMEA
Strategic Risk Solutions (SRS) is establishing operations in Guernsey. Peter Child has been appointed md, SRS Guernsey Management and will be responsible for the development and oversight of the firm’s business, including in connection with ILS. Child will take up his new position with SRS in July, but recruitment efforts to staff the Guernsey office will begin immediately. He was previously head of European operations and md, Guernsey at Artex Risk Solutions, and has also worked at Aon, Guernsey Financial Services Commission and Euler Hermes.

Jumbo DPR ABS closed
BCP Securities, Credit Suisse and Jefferies have purchased US$500m of diversified payment rights securitisation notes, in what is believed to be the largest-ever Latin American cross-border remittance transaction. A multi-disciplinary team in the Maples Group’s Luxembourg office supported the banks as legal counsel, while the firm’s fiduciary services team provided domiciliation, directorship and accounting services.

North America
Jason Merrill has joined Kuvare Insurance Services as vp, structured securities. Previously, Merrill held the position of investment specialist at Penn Mutual Asset Management, where he was responsible for trading, analysis, research and model development for CLOs, ABS and non-agency RMBS.

Spanish regulation revisited
The Bank of Spain has published draft regulation - that is open to consultation until 23 February - to prevent and mitigate risks to financial stability, which Moody’s suggests would be credit positive for RMBS, as the limits would tighten loan underwriting. The draft regulation allows the central bank to establish prudential limits on sector concentration and credit origination.

Meanwhile, the Spanish government has extended the deadline to request loan payment deferrals, given the longer-than-anticipated economic challenges caused by the Covid-19 pandemic. Households, the self-employed and firms related to the tourism and transport sectors are now allowed to request a moratorium on the capital and interest of their mortgage and unsecured loans up to 30 March 2021 for a maximum period of nine months. In addition, borrowers currently benefitting from a payment deferral on their loans can request an additional extension of the loan moratoria for a maximum cumulated period of nine months.

The extension of loan moratoria in Spain will not prevent loan underperformance for RMBS, says Moody’s. The extension is expected to provide some relief to the most vulnerable borrowers impacted by the renewed restrictions in Spain.

A second round of loan repayment moratoria or extension of payment deferral is most likely to be requested by those who are in weaker financial shape than they were in spring 2020. For this reason, higher roll rates are expected to default, with these measures failing to prevent the formation of problem loans once payment deferral schemes close.