Sector developments and company hires

Suit filed over alleged CMBS fraud
Kasowitz Benson Torres, as counsel to investment vehicles associated with Carl Icahn, has filed a complaint in Nevada state court against Rialto Capital Advisors for breach of contract and fraud. The case is in connection with Rialto’s servicing of a CMBS trust (COMM 2012-CR4) secured by the Prizm Outlets mall in Primm, Nevada, which resulted in a loss of almost US$73m, plus almost US$13m in fees. The property was reportedly sold in January 2021 for US$1.525m, representing the largest loss on a CMBS conduit loan since the financial crisis.

As alleged in the complaint, Rialto - as special servicer for the trust - breached its obligation to act in the best interest of trust investors by: improperly delaying the sale of Prizm Outlets while syphoning off millions of dollars from the trust; manipulating appraisals for the mall to avoid contractual provisions placing servicing decisions in the control of the class E notes held by the Icahn funds; and unlawfully acting for its own benefit and the benefit of mutual fund giant Putnam Investments and others. The latter are alleged to have interfered in the CMBS market to “protect their billion dollar bets” on CDS linked to the performance of Prizm Outlets and other CMBS assets referenced in the CMBX.6 index.  

In other news…

CAS tender offer underway
Fannie Mae is making another fixed price tender offer for the M2 tranches of 10 CAS issues, all of which were priced in 2016, 2017 and 2018. The principal balance at issue of the notes on offer totaled US$4.7bn, varying from US$713.3m for the M2 tranche of CAS 2016-C05 to US$389.9m for the M2 tranche of CAS 2018-C03.

The tender commenced on 24 June and concludes on 30 June. The GSE has engaged Bank of America as lead dealer manager for the tender.

Impact RE agreement signed
T30 Capital has entered into a strategic partnership with Blueprint Capital Advisors, with the aim of boosting its social impact and expanding its real estate lending business. Under the agreement, the two firms will execute US$5m-US$50m senior bridge and construction loans for properties including hotel, industrial multifamily and mixed-use, throughout the Northeast Corridor, and work to increase minority- and women-owned business enterprise by committing to ‘open door sourcing’. Through the partnership, T30 and Blueprint hope to be able to expand the pipeline of loan opportunities from US$750m to US$2.5bn.

North America
Vesttoo has hired ILS industry veteran Stefano Sola, who will serve as the new head of its global capital markets team. Sola joins the firm with extensive experience from Rewire Securities, having previously served as co-founder and ceo of both Rewire Securities and before that Merion Square Capital. As the new global head of capital markets, Sola will lead a team focused on capital raising and business development of Vesttoo worldwide, including the firm’s flagship ILS programme.

RMBS issuer acquired
Kensington Mortgages has been sold to Barclays Bank, after drawing a broad range of interest through an auction process. Barclays will acquire the business from funds affiliated with Kensington’s joint owners since 2015, Blackstone and Sixth Street. Subject to regulatory approval, the transaction will see Barclays acquire both Kensington Mortgage Company (KMC) and Kensington Mortgage Services (KMS), as well as a portfolio of primarily KMC-originated UK mortgages from October 2021 to the completion of the acquisition.

SME lending partnership inked
Funding Circle and a UK affiliate of Magnetar Capital have announced a lending partnership that is expected to provide more than £300m of funding to small businesses over a three-year period. The partnership will see Magnetar UK support thousands of UK SMEs by leveraging Funding Circle’s technology and distribution platform. In turn, Funding Circle’s machine learning models will provide Magnetar UK with a highly efficient and cost-effective mechanism to deploy capital to the real economy.

Magnetar UK joins a range of investors lending through Funding Circle’s platform, including banks, asset management companies, insurance companies, government-backed entities, individuals and funds. The partnership with Magnetar UK - which was advised by AgFe - follows a commitment by Waterfall Asset Management last month to lend a further £1bn through the Funding Circle platform. Waterfall’s initial investment with Funding Circle was also for £1bn in December 2018 and facilitated the execution of a number of securitisations.