Sector developments and company hires

CLO equity investment agreement inked
CQS has entered into a strategic investment agreement with Jefferies and three investment management firms to support the new issuance of US CLOs on the CQS platform. Under the terms of the agreement, Jefferies and the investment management firms will provide CLO equity capital and warehouse funding to support the new issuance of four to five CQS CLOs over the next two to three years, subject to certain conditions.

As strategic investors, Jefferies and the investment management firms will share in the growth of the CQS CLO platform, but are otherwise not involved in the management of the CLOs. Each of the investors will make their own independent decisions regarding the potential purchase or sale of any such CLO equity.

Led by Jim Fitzpatrick, the CQS US CLO platform is supported by the CQS global research capability, including 19 corporate credit analysts with an average of 15 years' experience located across the US and Europe. The launch builds upon the existing CQS European CLO platform.

EMEA
Insurance Partners Europe has recruited Pierre Mouilhade as co-founder, reinsurance brokerage and ILS advisory, based in Paris. He was previously an ILS portfolio manager and analyst at SCOR Investment Partners, which he joined in June 2015. Before that, he worked at AXA Group, Credit Agricole and Generali.

North America
Andrew Donahue has joined Mount Street US as a director responsible for asset management within the firm’s special servicing team based in Kansas. He was previously an asset manager, special servicing at Midland Loan Services, which he joined in March 2011.

Sycamore Tree Capital Partners has appointed Paul Travers as an md and portfolio manager, responsible for originating and managing the firm’s CLOs, reporting to cio Trey Parker. In this newly created role, Travers will also join Sycamore Tree’s investment committee, alongside Parker, Mark Okada, Scott Farrell and Jon Poglitsch (SCI 20 November 2020).

Travers joins Sycamore Tree with more than 38 years of relevant industry experience. He was previously a loan and CLO portfolio manager and investment committee member at Onex Credit Partners, where he led the company’s launch and buildout of its US CLO platform. Prior to that, he worked at DiMaio Ahmad Capital, Credit Agricole Indosuez, Merrill Lynch Asset Management, Bear Stearns, BHF Bank and Chase Manhattan Bank.

Structural strengths to mitigate AFV risk
The sale of new passenger internal combustion engine (ICE) vehicles is set to be phased out in Japan by the mid-2030s in favour of alternative fuel vehicles (AFVs), as part of the country’s decarbonisation efforts. Although this could reduce car resale values in the portfolios of auto loan ABS over the long term, several structural strengths mitigate the risk, according to Moody's.

Balloon payment loans in auto ABS portfolios will face heightened risk, as these require borrowers to make a large final payment at loan maturity. If borrowers need to sell their vehicles to meet this payment amid falling car resale values given the shift to AFVs, they may default on loans.

"However, some balloon loans have a prefixed car price at maturity, which mitigates resale value risks. This only works, though, if the pre-agreed buyers like dealers or finance companies are still in the market at loan maturity," says Atsushi Karikomi, a Moody's vp and senior credit officer.

He adds: "Furthermore, auto ABS deals have short maturity terms, typically around three to four years. This also mitigates resale value risks as they tend to evolve over the longer term.”

As AFVs start to account for a larger portion of the underlying vehicles backing auto loan ABS, resale value risks are also expected arise from price uncertainty for used AFVs. This is because rapidly changing technology, regulations and consumer preferences influence AFVs' future prices.

STS trade receivables programme launched
Metals and natural resources merchant Traxys has launched a global multi-currency securitisation programme. Backed by credit insured trade receivables originated by Traxys’ European and US subsidiaries, it is euro- and US dollar-denominated and split into three maturity tranches extending to two years.

This securitisation program allows Traxys to continue diversifying its working capital solutions, creates up to US$250m of additional capacity and lowers the absolute cost of financing Traxys’ activities. The programme has a flexible structure and can be increased to meet Traxys’ business needs over time. Further, it is STS certified by SVI for both ABCP and non-ABCP investors.

Arranged by Société Générale, the programme is funded by HSBC, ING, MUFG and SG. Redbridge Debt & Treasury Advisory and Accola supported Traxys with the structuring and implementation of the programme.