Sector developments and company hires

Apollo, illimity form NPE JV
illimity Bank has entered into a binding heads of terms to form a 50:50 joint venture with certain funds managed by Apollo Global Management aimed at investing up to €500m in single-name distressed credit exposure secured by real estate assets in Italy. The JV - which will have an initial investment period of two years, with an option to extend - will pursue investments in non-performing and unlikely-to-pay loans with individual prices of up to €50m.

The agreement also provides for the contribution by illimity of approximately €231m gross book value of loans previously purchased by the bank, which forms part of its current special situation real estate investment portfolio. Indeed, the JV provides for the direct involvement of illimity's special situations real estate teams and Apollo's European principal finance teams.

Neprix, which illimity Group set up to manage distressed corporate credit, has been selected as sole special servicer for the JV. The transaction is expected to be completed during 3Q21.

North America
Sourna Daneshvar has joined Aon Securities as md, reporting to ceo Paul Schultz. Based in Chicago, Daneshvar will focus primarily on expanding the firm’s capabilities in raising capital and product innovation. Having spent 20 years in the financial services sector, he joins Aon from Citi, where he was a director, specialising in securitisation and managing alternative sales and asset origination across both public and private markets for alternative institutional investors and insurance clients. He was previously a director at Credit Suisse, with roles including responsibility for business development and financing in Europe within Credit Suisse Prime Services.

Ocorian has appointed Kareem Robinson as client director - capital markets in the Cayman Islands, where he will oversee the structured finance team. Robinson has over 20 years of experience in structured and asset finance, having worked at Waystone and as deputy head of the securities supervision division at the Cayman Islands Monetary Authority.

RFC issued on supervisory reporting
The EBA has launched a public consultation to amend its implementing technical standards (ITS) on supervisory reporting with regards to COREP and asset encumbrance, as well as for the purposes of identifying global systemically important institutions (G-SIIs). The paper aims to enhance proportionality in the area of asset encumbrance reporting, as recommended by the EBA’s study on the cost of compliance (CoC) with supervisory reporting requirements. The consultation runs until 23 September 2021.

The EBA notes that in response to the Capital Markets Recovery Package (CMRP), the reporting on securitisations needs to be amended to keep it aligned with prudential requirements. Furthermore, the EBA is proposing some minor amendments to COREP (reporting on own funds and own funds requirements), in order to obtain a deeper understanding of institutions’ use of the option to exempt certain software assets from the deduction from own funds.

Following the proposals for enhanced proportionality on asset encumbrance reporting, small and non-complex institutions will be exempted from the reporting of more granular data, as proposed in the CoC report. The paper also suggests changing the definition of the level of asset encumbrance.

Regarding the reporting of information for determining G-SIIs and assigning G-SII buffer rates, the EBA is proposing to slightly expand the scope of application of the reporting obligation, to include standalone entities - not only banking groups - that meet the relevant criteria.

A public hearing in connection with the consultation will be held on 9 July.

SFR acquisition agreed
Blackstone Real Estate Income Trust (BREIT) is set to acquire single-family rental operator Home Partners of America (HPA), valuing the company at US$6bn. The investment will be supported by BREIT’s perpetual capital, enabling a long-term approach to the management of HPA properties.

The firm has a portfolio of over 17,000 homes across the US. BREIT intends to support the HPA management team as it explores opportunities to expand access to high-quality housing for lower income households, including by formally launching its Choice Lease programme. Choice Lease aims to provide a direct and tangible opportunity to help address housing affordability challenges.

The transaction is expected to close in 3Q21, subject to customary closing conditions and approvals.

Survey highlights ESG information paucity
Availability of robust and standardised information is a stumbling block for asset managers as they seek to evaluate ESG factors for their investment decisions, Fitch notes. Given that leveraged loans are privately issued, asset managers face more challenges in terms of access to relevant information, fewer possibilities for active engagement with issuers and less focus on ESG from loan and CLO investors than public equity investors.

Fitch surveyed 117 asset managers on their ESG investment practices and the results highlight the differing degrees of ESG integration, including policy implementation, information sourcing and evaluation frequency. Most respondents noted that they rely on publicly available data, while fewer sourced relevant information by requiring the LSTA ESG questionnaire to be completed. Some managers indicated that their credit analysts were best positioned to assess ESG risks and opportunities for issuers or industries they cover based on their deal due diligence and experience.

A key finding that is not so surprising is that smaller firms, based on total assets under management and a less diversified product offering, lag behind larger firms in effectuating ESG policy. Nearly all (93%) of the top third of firms by total AUM had a formal ESG policy in place, versus 72% for the bottom third in total AUM. The gap in formal policies among firms of differing size is likely to narrow in the near term, as ESG becomes a regular part of investor due diligence.

CLO-only firms lag in having formal policies in place, compared with the more diversely mandated firms that oversee managed accounts/funds in addition to CLOs, according to Fitch. Fewer US CLOs have ESG guidelines when compared with those that have established European operations.