Sector developments and company hires

CLO fallback language reviewed
S&P has reviewed the indentures of the 870 CLOs it rates to assess Libor fallback language governing a transaction's liabilities. The majority (76%) of its rated CLO transactions closed between 2018 and 2020.

ARRC-like fallback language can be found in 26% of the agency’s overall transactions, including 76% of the transactions that closed in 2020. However, approximately 130 US CLOs could theoretically become fixed-rate obligations post-Libor transition – although S&P expects this number to decline significantly in 2021, as large numbers of existing CLOs reset or refinance and update their Libor transition language.

In between, there are CLOs where the manager has the flexibility to select a replacement rate post-transition, with restrictions concerning what the new base rate can be. A handful of other approaches are also in place, including some relatively recent transactions with weaker replacement language. This can occur when a transaction is partially refinanced without amending the Libor fallback language for all Libor-linked liabilities.

EHMU 2007-2 payment error
An error in the Eurohome UK Mortgages 2007-2 cash manager’s quarterly report for the payment date on 15 June 2020 has resulted in an underpayment of £247,482 of principal to the deal’s class A2 notes and an overpayment of the same amount of interest to its residual certificates. As a consequence, there have also been small overpayments of interest to the class A2 noteholders on the two payment dates since 15 June 2020. The issuer has requested that the cash manager instruct the relevant clearing systems to effect recalls to amend the incorrect distribution of principal and interest.

NPL trading platform expands
Credit management services provider doValue has expanded its online non-performing loan trading platform doLook to Greece and Cyprus through an exclusive partnership with Debitos. The platform will be adapted to the needs of the Greek and Cypriot markets to facilitate the sale of NPLs, serviced both by doValue and third parties, by leveraging the technological infrastructure developed by Debitos that is already available in the Greek language. As such, doValue clients and third parties will be able to access more than 1,200 institutional investors from 16 countries already registered on Debitos.

The cooperation between doValue and Debitos started in April 2020, with the launch of doLook in Italy. More than 10,000 loan transactions have been created on doLook, as of end-2020. doValue has €37bn of AuM in servicing assets in Greece and Cyprus.