Sector developments and company hires

Houston CMBS has a problem
The Houston hotel sector is facing its greatest disruption ever, according to a new report from DBRS Morningstar. The hotel market in the fourth largest city in the US has gone from a fast expansion to crash as it is faced with a dual disaster.

“The combined effects of the energy sector recession in 2014-2016, followed by the coronavirus pandemic in 2020 have only further negatively affected the Houston area,” the report says. “While already troubled because of the oversupply and decreased demand from the oil/energy sector, hotels were looking to survive with modified loan terms over a stable period. Instead, the pandemic significantly disrupted demand in an already struggling area, leaving an uncertain future for many hotel properties backing CMBS loans.”

As the report concludes: “Oil prices have returned to their pre-pandemic levels and with growing fiscal stimulus and widespread vaccination, it seems the worst of the pandemic may be over. However, oil prices have not rebounded to the mid-2014 highs; the end of the pandemic does not erase the lost revenue of the last year and is unlikely to bring the energy industry back to its boom anytime soon.”

In other news…

EMEA

Alison Trusty has been promoted to associate partner - private debt and hedge fund specialist at Aon, having joined the firm in 2016 as a hedge fund researcher in London. Previously, she has worked at Hymans Robertson, Olympia Capital Management, City Asset Management and Towers Perrin.

Stefan Augustin has been appointed co-head of structured finance of ARC Ratings Group. Based in London, Augustin will lead the firm’s European business. Prior to joining ARC Ratings Group, he worked for ACRA, where he was global head of structured finance. Over the past 20 years, he has undertaken several senior roles at Moody’s, Funding Circle, Scope Ratings, Rothesay Life & Commerzbank.

ESG industry report cards published
S&P has published its ESG industry report cards for structured finance. The rating agency notes that its credit ratings on structured finance transactions incorporate ESG credit factors when, in its opinion, they could affect the likelihood of timely payment of interest or ultimate repayment of principal by the legal final maturity date of the securities.

The reports explore how ESG credit factors can affect an obligor's capacity to meet its financial commitments in many ways, including by qualitatively exploring the relative exposures of different sectors to ESG credit factors over the short, medium and long term. In addition, the structured finance ESG industry report cards list examples of ESG credit factors for the sector that may have a more positive or negative influence on a transaction's credit quality, compared to sector peers or the broader sector.

Global
Jim Lees and Vaibhav Piplapure have joined KKR as mds in the global private credit team, based in New York and London respectively. They will focus on sourcing investment opportunities in the specialty lending and private asset-based finance markets. Lees joins from Wells Fargo Securities, where he was md in the ABF business, and Piplapure joins from M&G Investments, where he was most recently co-head of specialty finance.

New placing programme proposed
Fair Oaks Income has published a prospectus and circular in relation to reorganisation and placing programme proposals. The proposals facilitate an extension of shareholders' investments through a new class of 2021 shares, deployed through the new Master Fund III, while also offering an option to elect for realisation shares and establishing a 12-month placing programme. Master Fund III is characterised by a fixed investment period and life, during which Fair Oaks will continue to utilise its tactical approach to investing across the CLO capital structure, seeking to take advantage of well-defined investment opportunities in both control equity and secondary mezzanine securities.

North America
Hunton Andrews Kurth has promoted structured finance and securitisation lawyer Serena Mentor from counsel to partner. Based in New York, Mentor has experience representing issuers, sponsors, underwriters, agents, trustees and servicers in connection with public and private securitisations, with a special focus on mortgage and mortgage-related assets.

SME fund launched
Kartesia has announced the final closing of its inaugural senior debt fund, Kartesia Senior Opportunities I. The firm has raised €1bn for its first-generation senior debt strategy, which provides senior financing solutions to European SMEs with strong credit profiles. The fund has already made 16 investments, where Kartesia’s sourcing and execution capabilities have allowed for a swift deployment of capital.

Strategic partnership
Russell Investments has agreed a strategic partnership that will provide its global clients with access to Hamilton Lane’s private markets investment solutions, data-driven research and innovative technology tools. Hamilton Lane’s capabilities will strengthen Russell Investments’ client value proposition by providing open-architecture investment solutions spanning the entire asset class spectrum. Hamilton Lane’s US$90m investment in Russell Investments demonstrates its commitment to this strategic partnership.