Sector developments and company hires

Aviation ABS industry eyes AerCap suit

The outcome of AerCap’s filing with the High Court in London could serve as a blueprint for other aircraft lessors with lease exposure in Russia. KBRA notes that in its discussions with the 14 lessors that act as servicers on the 30 aviation ABS it rates with exposure to Russian carriers, all have indicated they believe their leased assets that are currently trapped in Russia are covered by possessed/contingent insurance policies and all have filed claims with respect to these assets. However, many of the lessors concede that any recoveries from insurance claims will likely be the result of litigation and could take years to resolve.

AerCap’s lawsuit, which was launched in June, asserts that it has a valid insurance claim under policies written by AIG and Lloyd’s of London for the loss of 116 aircraft and 23 spare aircraft engines leased to Russian airlines. “Given that AerCap is the world’s largest aircraft leasing company and has an outsized lease exposure in Russia, the outcome of this pending litigation will be closely followed by other aircraft lessors, as they may decide to file similar legal claims against their insurers,” KBRA suggests.

As a result of a law allowing Russian carriers to register Western-built assets with the Russian national regulator, in response to Western sanctions, an estimated 500-plus aircraft leased to Russian carriers by non-Russian leasing firms are now trapped in Russian territory. Even if these aircraft could be recovered in the near term, valuations may be significantly impaired due to a lack of spare parts and components over the past eight months, as well uncertainty over the quality, documentation and timing of maintenance performed by Russian carriers (SCI 22 April).

KBRA reports that many aviation ABS servicers have deemed a total loss on assets located in Russia. “Funds obtained from the forfeiture of security deposits and maintenance reserves have helped to soften the blow, but any further recoveries will likely come from insurance proceeds, assuming lessors are successful in the many court battles that loom on the horizon,” the rating agency suggests.

In other news…..

EMEA

Matthew Cahill has been recruited by Dentons to join its quickly expanding Dublin office. Cahill marks the second banking and finance partner to join the firm’s Dublin office in the last few weeks, having opened just two years ago. Cahill joins the firm in Ireland from William Fry, where he currently serves as head of Structured Finance & Securitisation and Debt Capital Markets. Cahill brings extensive experience to the firm, having also previously served as a partner at Clifford Chance in London, and brings expertise in advising on securitisation, capital markets and derivatives transactions, as well as other general banking and finance matters.

New Jersey inks ‘toxic’ RMBS settlement

The New Jersey Bureau of Securities has reached a US$495m agreement in principle with Credit Suisse Securities (USA), Credit Suisse First Boston Mortgage Securities Corp and DLJ Mortgage Capital that would resolve a lawsuit arising from the offer and sale of RMBS from 2006 to 2007. Once final, the deal will be one of New Jersey’s largest civil monetary recoveries in the state’s history and will include approximately US$300m in restitution for investors nationwide.

The State of New Jersey alleged that Credit Suisse made material misrepresentations in the offering documents about the risks of the RMBS, including by failing to disclose material defects of the underlying mortgages, in violation of New Jersey’s securities laws. As alleged, Credit Suisse perpetrated much of the fraud from its office in Princeton, New Jersey. The firm will neither admit nor deny these allegations as part of the anticipated settlement.

Under the agreement in principle, Credit Suisse will also pay a civil monetary penalty of US$100m - with a claims administrator appointed to help distribute the restitution to investors - and permanently enjoin the firm from future violations of New Jersey’s securities laws.

North America

Greystone has appointed AJ Walker as md to its office in Chicago, as it continues the expansion of its CMBS platform. Walker joins the firm from Wells Fargo where he operated as director, leading the firm’s real estate capital markets origination efforts for the Midwest. In his new role, Walker will report to head of CMBS at Greystone, Rich Highfield, and will focus primarily on the origination of commercial real estate loans across the US.