Sector developments and company hires

‘Penalising’ RBC proposal criticised
The LSTA has submitted a comment letter to the NAIC expressing its belief that the NAIC’s risk-based capital (RBC) proposal could penalise insurance company investments in CLOs and consequently impact the CLO and loan markets. The proposal would change the RBC framework such that capital requirements for purchasing all tranches of a CLO match the capital requirements for directly holding the underlying collateral, based on the assumption that the investment strategy presents the same investment risk as holding the entire pool of underlying loan collateral.

In addition, the NAIC is considering adding two new RBC factors to account for the ‘tail risk’ in any structured finance tranche of 75% and 100%. These proposals could lead to significantly higher RBC on CLO note holdings up to – and potentially beyond – the triple-B notes.

The LSTA notes that insurance companies have more than US$200bn invested in CLO notes, including over half of US CLO triple-B notes issued. As such, squeezing their demand for these assets could have a material knock-on effect on the CLO market.

“For companies writing long-tail liabilities, CLOs represent an investment solution that helps meet their asset-liability matching goals. Quickly making such investments less attractive to insurance companies could have material unintended consequences for insurance companies and their policyholders. In particular, insufficient time to reorient their portfolios could have a dislocating impact on insurance company balance sheets and the loan market as CLO investments are sold,” the association argues.

Further, the LSTA highlights the lower loss experience of CLOs historically. In particular, it points to the strong performance of the asset class - thanks to an active management strategy constrained by quality-enhancing tests - and the structural protections embedded in CLOs.

Finally, the association criticises the fact that the industry only received “30 days-and-change” to comment on the proposals. “This simply isn’t sufficient time for the industry to provide constructive feedback on a proposal that requires significant review, analysis and modeling,” it observes.

In other news…

CRE JV formed
Ready Capital and Starz Real Estate have formed a joint venture to originate circa €300m of new commercial real estate loans over the next two years. The new joint venture will focus on deploying commercial real estate bridge and term loans of between €10m and €40m in size across the UK, Benelux, DACH Region, Italy and Portugal with up to 75% LTV across sectors including office, residential, mixed-use, student housing, logistics, self-storage and selective retail and hotel opportunities. The joint venture can also offer construction lending across these continental European locations.

EMEA
Arrow Global is set to establish a new office in Luxembourg City, in a move to support its fund investment strategies in the region. The firm hopes the new office will better deliver infrastructure to its existing Arrow ACO 1 Fund vehicle located in Luxembourg, as well as helping further future investment vehicles within the area. The new office will initially be made up of a fund treasury team, which Arrow hopes to scale to a multi-disciplinary team in Luxembourg City over the next two years.

Pemberton has recruited four new senior hires, bringing the number of professionals it employs to over 145 across 10 offices. Among the new hires is Sally Tankard, who joins Pemberton’s CLO team as a director, responsible for analysis and selection of leveraged finance assets for the firm’s CLOs. She was previously a consultant at Hornblower Business Brokers and a senior analyst at Spire Partners.

Additionally, Pemberton has appointed Christoph Polomsky as md in the business development team for the DACH region, responsible for the coverage of institutional clients. Based in the Frankfurt office, Polomsky was previously an md at Nomura, leading the solutions team. At Nomura, he worked on bespoke investment solutions, as well as the origination, structuring and distribution of financing and securitisation solutions for reverse mortgages, SME portfolios, leases and renewables projects.

North America
Chapman and Cutler has recruited Bart Pisella as a partner within its corporate finance and asset securitisation departments and special situations and restructuring group. Pisella focuses his practice on representing and advising corporate trusts in all aspects of corporate debt offerings, loan administration, collateral agency, escrow and other specialty trustee and agency matters. He was previously a partner at Winston & Strawn and before that, worked at Pillsbury Winthrop Shaw Pittman and Nixon Peabody.

Eagle Point has hired Mary Parrinelli as md of investor relations, responsible for strengthening existing investor relationships and introducing the firm and its strategies to the wider institutional investor community. She will report to principal and head of marketing and investor relations, Kyle McGrady. Parrinelli joins Eagle Point from Angelo Gordon, where she most recently served as an md on its marketing team and worked on new business development in the institutional investor community across multiple strategies, including structured credit.

Societe Generale has named Fouad Farah head of fixed income, Americas. Based in New York, he will oversee the trading, sales and engineering teams, as well as continuing his current role as head of credit and structured financing Americas. Farah joined the bank in January 2008 as md, global head of special situations trading.

Warwick Capital Partners has appointed Leland Hart and Andrew Welty as partners, based in New York and Arizona respectively. Hart was formerly co-cio at Alcentra, having previously worked at Wheelhouse Investment Partners, BlackRock, R3 Capital, Lehman Brothers and Bank of America. Welty has been acting as a consultant to Warwick since 2011, alongside a finance and investor relations role at Per Astra. Before that, he worked at Polygon Investment Partners, Nomura and Deutsche Bank.