Sector developments and company hires

Supreme Court grants CFPB petition
The US Supreme Court has granted the CFPB’s Petition for a Writ of Certiorari in the case of ‘CFPB v. Community Financial Services Association of America’ and denied the cross-petition filed by Community Financial Services Association of America (CFSAA). The CFPB’s petition asked the court to overturn the 19 October 2022 ruling by the US Court of Appeals for the Fifth Circuit that the CFPB’s funding structure is unconstitutional and, therefore, that the CFPB’s payday lending rule is invalid (SCI 4 November 2022).

Cadwalader notes that by granting the CFPB’s petition, the Supreme Court will have the opportunity to address significant questions about the meaning of the Appropriations Clause, the appropriate remedy for the purported constitutional violation and the viability of the CFPB and other federal financial regulators that are funded outside of annual appropriations. Attorneys General of 21 Democratic states and the District of Columbia have submitted an amicus brief arguing that the potential loss of the “CFPB’s critical enforcement, regulatory and informational functions” threatens “substantial harm to the states.”

However, in another amicus brief, 16 Republican Attorneys General emphasised the federalism concerns underlying this case. They urged the Court to uphold the Fifth Circuit’s decision, in order to “provide the states certainty over their role in regulating our financial system” and “restore the CFPB’s accountability to the states.”

In other news…

CRE REITs merge
Ready Capital Corporation and Broadmark Realty Capital have entered into a definitive merger agreement, pursuant to which Broadmark will merge with Ready Capital. Upon completion of the merger, Ready Capital is expected to have a pro forma equity capital base of US$2.8bn, becoming the fourth largest commercial mortgage REIT.

The combined company will operate under the Ready Capital branding and continue to be managed by Waterfall Asset Management. The combined company is expected to capture economics throughout the full lifecycle of a property and retain sponsor relationships beyond construction and/or bridge stages.

Upon completion of the merger, Ready Capital’s chairman, ceo and cio Thomas Capasse will continue to lead the company and Ready Capital executives Jack Ross, Andrew Ahlborn, Gary Taylor and Adam Zausmer will remain in their current roles. The board of the combined company is expected to increase by three Broadmark-designated directors to 12 directors.

The transaction is expected to close during 2Q23, subject to customary closing conditions.

Global
Stafford Capital Partners has appointed former head of the Australia Post Superannuation Scheme (APSS), Stephen Milburn-Pyle, to its credit investment committee. Milburn-Pyle joined Australia Post in 2005 and held executive responsibility for the strategic and operational management of the APSS until its transfer into Australian Retirement Trust (ART) in 2022.

Since being appointed to the APSS, he has worked with Stafford in the timberland, infrastructure, private equity and private credit sectors. Stafford launched a dedicated private credit strategy for the APSS - the Stafford Credit Opportunity Trust (SCOT) – in 2017.

North America
Proskauer has added Matthew Kerfoot as a partner in its finance group, based in New York. Kerfoot brings more than 20 years of experience in the fund finance industry, including expertise in a broad spectrum of private equity and private credit financing and liquidity solutions. He joins Proskauer from Société Générale, where he was md of credit and structured financing, structuring collateralised financings for portfolios of private equity secondaries, middle market loans, broadly syndicated loans and senior and mezzanine tranches of CLOs, CFOs and other securitised products.

Taxonomy-aligned EUGBS agreed
The European Parliament has agreed a European Green Bond Standard (EUGBS) that aligns with the Taxonomy legislation, which defines which economic activities can be considered as environmentally sustainable. PCS notes that although the text of the EUGBS compromise is not public, indications are that the final agreement may incorporate securitisation and do so on the basis of proceeds rather than assets.

Under the agreement, companies choosing to use the standard when marketing a green bond will be required to disclose information about how the bond’s proceeds will be used, but are also obliged to show how those investments feed into the transition plans of the company as a whole. The disclosure requirements, set out in template formats, will also be open to be used by companies issuing bonds which cannot fulfil all the requirements to qualify for the EUGBS.

Additionally, the regulation establishes a registration system and supervisory framework for external reviewers of European green bonds. It also stipulates that any actual or even potential conflicts of interest are properly identified, eliminated or managed, and disclosed in a transparent manner.

Technical standards may be developed specifying the criteria with which to assess the management of conflicts of interest.