Sector developments and company hires

Data centre leverage ‘inconsistent’ with ratings
A number of wholesale data centre securitisations issued in recent years carry elevated leverage that is inconsistent with the single-A rating category, Fitch suggests. The rating agency states that these transactions have weaker credit characteristics and substantially higher leverage multiples than other comparable digital real estate securitisations, such as wireless tower transactions, and higher leverage multiples than single-borrower CMBS backed by trophy assets. As such, it believes these transactions require more credit protection to achieve high investment-grade ratings.

A number of single-A rated wholesale data centre transactions have been issued recently with debt/issuer expected cashflow multiples of 11x-13x. By contrast, Fitch single-A rated tranches of wireless tower and best-in-class single-borrower CMBS have historically had 7x-9x leverage.

“Data centre leverage is incongruous with a single-A rating, as transactions backed by more volatile cashflows support lower leverage than transactions backed by wireless towers and trophy real estate assets that are backed by more predictable cashflows,” it observes.

Ratings analysis for data centre transactions emphasise LTV to assess leverage, typically targeting 70% LTV for single-A ratings. “While LTV is useful, it does not address relative exposure to cashflow declines, refinance risk and technological obsolescence - all of which Fitch considers in its analysis. Using cashflow to assess leverage more clearly illustrates the cashflow decline a property could withstand before debt service coverage falls below zero, the maximum interest rate and loan balance supported in a refinance scenario, and the amount of time required to repay a loan under a cashflow sweep scenario,” the agency adds.

It points out that data centre cashflow is vulnerable to technological obsolescence, oversupply and tenant churn.

In other news…

CIFC launches philanthropic programme
CIFC Asset Management has launched the CLO Initiative for Change, a philanthropic programme in connection with CLOs issued by the firm, dedicated to supporting organisations driving social, economic or environmental change. Under the initiative, CIFC has partnered with the deal parties of its latest CLO - CIFC Funding 2021-IV - including RBC Capital Markets, Appleby (Cayman), Allen & Overy, Milbank, BNY Mellon and Locke Lord, to make a collective contribution of US$145,000 to Black Girls CODE (BGC). The programme is commited to making coordinated donations of this kind on an annual basis to different organisations.

Founded by Kimberly Bryant in 2011, BGC is a non-profit organisation focused on empowering girls of colour aged seven to 17 to become innovators in the science, technology, engineering and maths (STEM) fields, leaders in their communities and builders of their own futures through exposure to computer science and technology. The organisation aspires to educate one million girls of colour by 2040 through after-school programmes, workshops, virtual events, mentorships, summer programmes and access to a growing alumni network.

EMEA
Blackstar Capital has appointed James Paul as head of sport, responsible for leading the firm’s expansion into the sporting portfolio segment. Paul joined Blackstar in 2020 as a portfolio manager. Prior to joining Blackstar Capital, he gained more than eight years’ experience in a number of credit-focused roles at JPMorgan, Credit Suisse and 23 Capital, covering a range of industries, geographies, asset classes and product types.