Structured Finance In Brief

Updates and Analysis on current structured finance issues, upcoming events and activities of Reed Smith's structured finance group

Thus far CMBS has had a storming year and all current indicators point towards 2018 being a bumper year for the product.  After two years of relative malaise on the primary issuance front, the first half of 2018 has proven to be anything but sluggish.  Notable transactions that have so far taken place include Citibank and Morgan Stanley ‎closing an extremely well priced transaction secured by Finnish assets (a CMBS 2.0 first), Bank of America Merrill…
Rather like the Hans Christian Anderson story about the little match girl, the news that BAML has successfully launched two CMBS deals in quick succession has flickered light into an otherwise cold and beleaguered primary issuance market.  Not only do these transactions provide a clear indicator that there is still life in the market, but this news is the most positive development for the industry since the summer of 2015, when adverse macro-economic factors precipitated…
On 7 April, the Bank of England gave financial firms a hard deadline of 14 July for submitting their contingency plans for Brexit, which passed last Friday. These plans were required to contemplate a variety of scenarios including the prospect of a “hard Brexit”, which as the UK and EU governments continue along the path of tough Brexit negotiations, probably makes the Banks wish they possessed a crystal ball… For more information please see our…
The recent news that Blackstone and Lone Star have just securitized a portfolio of re-performing loans secured by Spanish and Irish real estate respectively, could potentially mark the arrival of a new era for the European securitization market. Indeed, if these transactions prove themselves to be the green shoots for the emergence of a new fixed income product, then this has the potential to have widespread positive ramifications for not only yield hungry fixed income…
Earlier this month the Bank of England’s Prudential Regulation Authority (the ‘PRA’) wrote to all UK companies undertaking cross-border activities between the UK and the EU under passporting arrangements, requesting a summary of their Brexit contingency plans. The letter continues the regulator’s focus on ensuring firms have robust measures and business strategies in place to respond to market turbulence.  Addressed to the CEO/Branch Manager of each company, the letter states that firms are expected to…
The provision of indemnities, particularly those provided to corporate trustees and agents, is an important feature of an effectively functioning structured finance market.  It enables the parties involved to allocate the risks of unforeseen expenditure to those parties with the ultimate economic interest in the transaction and allows trustees and agents to keep their fees at a reasonable level. Whilst the need for indemnities is generally accepted, the terms on which they are provided can…
Credit rating agencies (‘CRAs’) that operate in the EU will be interested to hear that on 30 March 2017, ESMA published an update to its Questions & Answers (Q&A) on the ‘CRA’ Regulation (Regulation 1060/2009, as amended in 2011 and 2013).  The CRA Regulation requires CRAs within the EU to be registered and to comply with requirements relating to their independence and avoidance of conflicts of interest, their methodologies, their disclosures and their approach to…
This week saw the High Court clash between the swap provider, UBS, and the recently appointed replacement note trustee (Glas Trust Corporation) on the embattled Fairhold Securitisation.  The dispute at hand centres on whether or not the ad hoc noteholders group’s fees and expenses (comprising the fees of its financial adviser and lawyers) can be recovered from the waterfall, effectively subordinating payments to the swap providers and noteholders.  The financial adviser’s fees were reported to…
Following their loss at first instance in Titan Europe 2006-1 P.L.C. and others [2016] EWHC 969 (Ch) (the background to the case and our commentary can be found here), the Class X Noteholder appealed the decision in respect of the central issue in the proceedings –  when calculating the Class X Interest Rate in accordance with the Conditions, is it necessary to take account of any additional interest due under the Loans following a…
The recent spate of litigation in CMBS transactions by noteholders to obtain interpretations of their rights directly in the English courts rather than through the note trustee raises two distinct questions: do investors have standing as a matter of both the transaction documents and general contract law to launch such proceedings and secondly should they be able to? A typical limited recourse CMBS transaction will contain a general restriction on noteholders proceedings directly against the…