Sector developments and company hires

UHNW securitisation under scrutiny
Pomerantz has filed a class action lawsuit against Credit Suisse Group and certain of its officers in the US District Court for the Eastern District of New York, on behalf of purchasers of Credit Suisse securities between 19 March 2021 and 25 March 2022 inclusive. The case seeks to recover damages caused by the defendants’ alleged violations of the federal securities laws and to pursue remedies against the bank under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

In a statement, Pomerantz notes that Credit Suisse “has a history of business dealings with Russian oligarchs or ultra-high net worth business leaders possessing significant political influence”. The law firm also cites a recent Credit Suisse synthetic securitisation that references a US$2bn portfolio of loans extended to certain of the bank’s ultra-high net worth clients (SCI 8 December 2021).

The investor presentation for the deal allegedly disclosed that in 2017 and 2018, Credit Suisse experienced 12 defaults on yacht and aircraft loans, a third of which were related to US sanctions against Russian oligarchs. Barely a week after the commencement of Russia’s invasion of Ukraine and the retaliatory sanctions imposed by Western nations, news outlets reported that Credit Suisse had requested non-participating investors who received information about the bank’s loan portfolio destroy any confidential information provided to them regarding the securitisation.

On 28 March, the US House of Representatives Committee on Oversight and Reform sent Credit Suisse a letter asking the bank to turn over information and documents about a portfolio of loans backed by yachts and private jets owned by clients, potentially including sanctioned Russian individuals. The letter questioned Credit Suisse’s request that non-participating investors “destroy documents” related to yachts and private jets owned by the bank’s clients, indicating that such an action raises concerns that the bank may be concealing information about whether participants in the deal may be “evading sanctions” imposed by the West after Russia’s invasion of Ukraine.

The complaint alleges that, throughout the class action period, defendants made materially false and misleading statements regarding the bank’s business, operations and compliance policies.

In other news…

ECAI mapping ITS published
The EBA has published its final draft implementing technical standards (ITS) to amend the Implementing Regulation on the mapping of credit assessments of external credit assessment institutions (ECAIs) for securitisation positions. The authority says the changes reflect the relevant amendments introduced by the new Securitisation Framework, as well as the mappings for three ECAIs that extended their credit assessments to cover securitisations. The Implementing Regulation is part of the EU Single Rulebook for banking aimed at creating a safe and sound regulatory framework consistently applicable across the EU.

Amendments to the CRR under the new Securitisation Framework made it necessary to update the mapping tables of ECAI credit assessments for securitisation positions. Following the amendments to Chapter 5 of the CRR, a hierarchy of approaches was set out to calculate capital requirements for positions in a securitisation, whereby institutions using SEC-ERBA shall calculate risk-weighted exposure amounts based on credit quality steps (CQS) set out in the CRR. The amended Regulation reflects 18 CQS for long-term external credit assessments, with the aim of enhancing granularity and risk sensitivity with respect to the approaches previously considered in the Regulation. 

Since the adoption of the Implementing Regulation, one additional ECAI has been established in the EU with methodologies and processes in place for producing credit assessments for securitisation instruments, two existing ECAIs have extended their credit assessments to cover securitisations and ESMA has withdrawn the registration of an ECAI. These changes have been reflected in the mapping tables accordingly.

The EBA also published individual draft mapping reports illustrating how the methodology was applied to produce the mappings. 

EMEA
Morgan Lewis continues the expansion of its global structured credit business with the hire of new partner Richard Hanson. Joining the firm’s London office from Orrick, Hanson marks the latest addition to the Morgan Lewis structured transactions team and follows the hire of partner Merryn Craske earlier this year as the firm works to beef up its global transaction capabilities. Hanson has experience advising both alternative investment funds and asset managers on structured finance, securitisation and bespoke finance solutions across alternative and illiquid asset classes.

Stuart Axford has joined Schulte Roth & Zabel’s London finance and derivatives group from Arnold & Porter, bringing over 25 years of experience in securitisation to the new role. His hire follows several other new additions to the firm’s global practice, including new partner Martin Sharkey in London who focuses on CLOs. With experience across residential and commercial mortgages, auto loans, aircraft and supply chain finance, as well as cryptocurrencies and NFTs, the firm hopes Axford will offer greater guidance across an array of financing opportunities.

Global
JPMorgan has named executive directors CJ Martino and Nicolas Robin co-heads of global institutional structuring. Martino joined the firm in June 2012 and most recently led a New York team focused on credit structuring for investor clients, including synthetic securitisations. London-based Robin began his career at Societe Generale in 2002 and has also worked at Barclays.

North America
Churchill has hired Jason Quinn as md in origination to lead its Los Angeles office. Quinn brings more than 14 years of experience to the role and joins from Antares Capital, where he served as svp and maintained responsibility for sourcing deals and managing relationship with private sponsors. In his new role, Quinn will head up the development and maintenance of existing private equity sponsor relationships, and source new senior lending opportunities in the western region of the US. He will report to Churchill’s co-head of senior lending, Randy Schwimmer.

Sabal has welcomed 11 new hires to its team and named its former head of agency lending, Ed Hussey, as new head of conventional agency lending in a bid to support the firm’s second phase of development following its acquisition by Regions Bank. The new hires include Ann Atkinson, who joins Sabal as a small balance loan and market real estate production manager, after spending more than 20 years with Fannie Mae. The remaining new hires will support the origination, underwriting and servicing of the firm’s agency and non-agency programmes, including Sabal’s CMBS conduit loan programme.

Amanda Montgomery and Marc Gonyea are set to join Sycamore Tree in leadership marketing roles as the firm works to build new and strengthen existing relationships with institutional investors and consultants. Montgomery and Gonyea will both serve as mds and join Sycamore Tree from Allianz Global Investors and Alcentra respectively.

Z Capital has hired three new directors to its investment team – Jedidiah Lee, Gregory Poos and Vlad Vladescu. The three new directors join the Z Capital Credit Partners’ investment team with extensive experience in the leveraged credit markets, including CLOs. Lee, Poos and Vladescu previously worked at Bayside Capital, ArrowMark Partners and King Street Capital respectively. They will maintain responsibility for sourcing, researching and analysis across existing and prospective performing, stressed and distressed investments, and middle market loans.

RFC issued on STS sustainability indicators
The European Supervisory Authorities (ESAs) have published a consultation paper seeking input on draft regulatory technical standards (RTS) on the content, methodologies and presentation of information in respect of the sustainability indicators for STS securitisations. The move is in line with the mandate given to the ESAs under an amendment to the Securitisation Regulation in April 2021 that was part of the capital markets recovery package (CMRP).

The proposed draft RTS aim to: facilitate originator disclosure of the principal adverse impacts of assets financed by STS securitisations on ESG-related factors; supplement the single rulebook under the Securitisation Regulation as amended by the CMRP; and draw upon the ESAs’ work in respect of sustainability-related disclosures in financial services under the SFDR. Because securitisation is not a ‘financial product’ under the SFDR, it was decided in the CMRP that originators of STS deals should have the option to disclose principal adverse impacts. Rabobank credit analysts note that the ESAs have sought to ensure harmonisation and consistency between the SFDR RTS and these new draft RTS, while also adapting it where necessary for securitisation specifically.

The closing date for responses to the consultation is 2 July, following which the draft RTS will be finalised and submitted to the European Commission for adoption.