Sector developments and company hires

Innovative UTP fund launched
illimity Group asset management company illimity SGR has completed the first closing of its illimity Credit & Corporate Turnaround (iCCT) fund, dedicated to investments in unlikely-to-pay (UTP) loans to SMEs with revival and relaunch prospects. The initial portfolio consists of loans for a total of over €200m made to 33 companies operating in diversified sectors.

These loans have been sold by seven banking groups - Banca Popolare di Sondrio, Banca Sella, Banco Desio, BNL Gruppo BNP Paribas, BPER Gruppo, Gruppo Bancario Cooperativo Iccrea and Gruppo La Cassa di Ravenna - which then became unit holders in the fund. The initial cash facilities – subscribed to by institutional investors, including illimity Bank – amount to €25m and will be used to service the acquired loans and support the turnaround of the companies in which the fund has invested.

The iCCT fund includes a number of innovative features, such as the ability to acquire and manage fully operational short-term credit lines and - through a securitisation structure - receivables and leasing agreements in continuity. These features enable the banks to fully transfer their financial exposure and to benefit from the restructuring process of the corporates.

The illimity Group was assisted by BE Partner in structuring SGR and the fund, as well as on negotiations regarding the purchase of the loans. PwC assisted SGR on the fairness of the loan valuations and relative valuation models. The securitisation of loans and leasing contracts was structured by Banca Finint.

illimity SGR says it intends to pursue a multi-product strategy, with further funds focusing on both SMEs and other sectors where it is able to leverage its skills, including by offering strategic advisory services.

Mortgages in forbearance drop
The number of mortgages in forbearance dropped in the last week by the biggest amount in six months, according to Black Knight. Active plans in forbearance fell by 228,000 from 30 March, a 9% drop in only seven days. The improvement was across the board, with FHA/VA loans recording the largest drop of 94,000, followed by a 69,000 fall in GSE loans.

While encouraging, the precipitous fall was anticipated as many borrowers exited forbearance plans as they hit the 12-month expiry date.

The number of active plans has declined by 323,000 in the last month, which represents the strongest rate of improvement since November. Forbearance has now been reduced by 51% from the peak.

As of 6 April, 2.3m of homeowners are still in forbearance, which is equivalent to 4.4% of all mortgage-holders. Another 500,000 plans face expirations at the end of April.

New York statute welcomed
The US securitisation industry has welcomed the signing into law by New York governor Andrew Cuomo of a new statute that should ease the transition from Libor to SOFR for contracts governed by New York law. The new law, inked on 6 April, had been expected (SCI 29 March).

The bill was developed and framed by the Alternative Reference Rates Committee (ARRC) and allows transactions without fallback language to automatically assume usage of SOFR upon the expiry of US dollar Libor, which is now likely to be mid-2023.

Most US RMBS and ABS Libor-linked notes issued before 2018 have no or inadequate fallback provisions, as the demise of the reference rate was never envisaged.

Under the terms of the new law, no counterparty can use the end of Libor as an excuse to step away from its contracted responsibilities. It also provides a safe harbour that prevents any counterparty from being held liable for any claims arising from the use of a new reference rate.

Though a good step, it does not mean the US structured finance market is out of the woods. The new law applies only to contracts governed by New York law and there is considerable disquiet in the industry that SOFR is an unsatisfactory replacement for Libor.

North America
Elementum has promoted Lynette Pirilla Walter to chief legal officer. She joined the firm in 2014, first as outside counsel and then in-house counsel beginning in 2019. Prior to Elementum, she practiced at Sidley Austin.

Additionally, Elementum (Bermuda) has recruited John Drnek as general counsel. He was previously at RenaissanceRe, where he provided counsel on legal, compliance and regulatory matters. Before that, he worked at Tokio Millennium Re, Mayer Brown, Hogan Lovells and Cadwalader.

US Bank has promoted John Stern to president of its global corporate trust and custody business, within the firm’s wealth management and investment services unit. He currently serves as US Bank corporate treasurer and will begin his new role on 17 May. Stern has around 20 years of experience in the sector and succeeds Joseph Giordano, who has announced his plans to retire this summer.

Pubco confirms securitisation waivers
Marston's reports that it has secured waivers and amendments to its bank, private placement and securitised facilities for the financial periods up to and including 1 January 2022. Within the securitisation, Marston's says it received strong support from bondholders, who have approved waivers for the two-quarter tests to 2 October 2021 and the four-quarter test to 1 January 2022. The group's banks and private placement have approved the adoption of liquidity and quarterly profit covenants to 1 January 2022.

Meanwhile, the group expects to reopen around 70% (circa 700) of its managed and franchised pubs in England with outdoor spaces on or around 12 April and, subject to final regulatory confirmation, the majority of its Scottish and Welsh pubs on 26 April. On the basis that the stated reopening roadmap set out by the UK government is adhered to, the remaining managed estate in England should open on or around 17 May with restricted indoor trading, and Marston’s is assuming a return to normal trading conditions from 21 June.