The Dilemma of the Really Annoyed Borrower

Since my earliest days in the CRE capital markets biz, there has always been a drumbeat of grumbling from the borrower community about the annoying complexity, expense and delay of having one’s loan serviced in a capital markets transaction.  It’s been going on forever.  Like noise, like listening to Brits complaining about their weather; it’s ubiquitous, apparently personally gratifying, but largely inconsequential for outcomes.  The business goes on.  Data indicates that as many as 60% of all new CMBS loans come from refinancing non-CMBS loans, so it’s  not like a structured finance ghetto here.  The sell side takes comfort from the old saw that no sensible borrower would go to the CMBS window except as a last resort… like, three basis points or five bucks in extra proceeds.  Ok, that’s a tad too harsh and dismissive.  But going to the capital markets window for lower rates, more proceeds or less recourse is entirely rational.  On the other hand, the narrative about the pain through servicing in the capital markets is also real. Continue Reading

Dechert LLP and Richard D. Jones Recognized for Industry Leadership

It is awards season and we here at Crunched Credit have much to celebrate!

Dechert LLP named “Law Firm of the Year” by PDI, PEI and PERE

Dechert LLP was recently honored in five “Law Firm of the Year” awards across Europe, the Americas, and Asia by Private Debt Investor (PDI), Private Equity International (PEI) and Private Equity Real Estate (PERE), respectively. The PDI Awards 2016 named Dechert “Law firm of the Year in the Americas,” for the second consecutive year. Dechert was also honored as a finalist in Europe. PDI award winners are nominated and voted upon entirely by industry participants and service providers.

Dechert’s Representation of Private Investment Funds Recognized

Dechert finished in second place in the PEI Awards 2016 for the Asia-Pacific Region, in connection with which it was lauded for its outstanding work representing private investment funds, particularly in matters involving fund formation, and also placed second in the “Law Firm of the Year in Asia-Pacific (Secondaries)” category. The PEI Award winners are nominated by the publication itself based on feedback from a broad swath of industry participants; nominees are then voted upon by PEI’s readership.

Dechert’s significant representations and achievements in fund formation garnered it recognition as a finalist in the PERE Global Awards 2016, which honor leading industry participants in the private real estate markets and are also decided by industry vote.

Richard D. Jones named Top Investment Management Author

Crunched Credit’s blogger-in-chief, Richard D. Jones, has been recognized as a Top Author in the Investment Management industry category in JD Supra’s 2017 Readers Choice Awards. Readers of Crunched Credit know Rick as a thought leader with a style of writing all his own (just last week he mused, “our business will continue to grind along in a kind of middling trailer trash Goldilocks sort of way”), so please join us in congratulating Rick on this achievement.

This is the second year that JD Supra has given these awards, which acknowledge top authors and firms for their excellent reach with readers in a specific industry or for thought leadership writing on a key, cross-industry topic. The awards are tallied based upon the total number of reads an author had over the course of 2016; and we are thrilled that Rick was named among the top 10 out of 6,000+ in the investment management category! From all of us here at Crunched Credit, thank you to the readers who voted for Rick’s work and we look forward to another year of blogging about the black and/or orange swans on Crunched Credit.

We would like to offer our sincere and humble thanks to those who participated in the voting for these awards.

Reading the Financial Tea Leaves: CREFC Market Outlook Survey 2017

CREFC has surveyed some of its attendees—all major participants in the commercial real estate finance industry—at the 2017 CRE Finance Council January Conference in Miami.  CREFC’s 2017 market outlook survey confirmed what we observed at the conference this year, that for the most part survey respondents were cautiously optimistic in the face of the Trump Administration, Risk Retention and movement near the peak of the real estate cycle.  We decided to dig a little deeper to see how this year’s survey responses differed from last year’s. Armed with the benefit of a little hindsight, let’s consider the year we had, the year we expected, and the year we’ve just begun.

Continue Reading

Observations from SFIG Vegas 2017 Conference

SFIG Vegas 2017, which took place last week at Aria Resort & Casino, was the largest capital markets conference in the world, according to the Structured Finance Industry Group. With over 6,300 registered attendees, and I suspect thousands more who came to Vegas to attend meetings without registering for the conference, it’s hard to imagine that anyone in our industry wasn’t in Vegas last week. And while the weather in Vegas during the conference was unseasonably chilly, there was the warm glow of an industry feeling pretty good about its prospects inside the conference halls. The conference agenda was jam packed and the mood upbeat.

There was a lot to catchup on since our last industry-wide get together last September at the 22nd Annual ABS East conference. Donald Trump was elected President, an outcome that was uncertain at best five months ago. The Fed raised interest rates. Risk retention arrived (effective December 24, 2016) with seemingly little fanfare (although for those of us on the legal side, we appreciate all the legal work it created). The DOW set new records throughout January and February in its second-fastest rise in U.S. history. And Angelina Jolie filed for divorce from Brad Pitt. Four out of five of these topics were the focus of much discussion at the conference. I won’t say which one was left out.

Based on panels and side conversations:

The industry as a whole seems to have cleared the risk retention hurdle with limited disruption.

  • Although some industry players think there is a possibility of repeal of large portions of Dodd-Frank under the new administration, most seemed to think that a full repeal is improbable.
  • Spreads are expected to continue tightening while Treasury and LIBOR rates continue to creep upwards. All this seems consistent with steady growth ahead in the near term. Beyond that, if only I knew.
  • While some commentators believe we are nearing the end of this cycle, no one seems to be sounding alarm bells.

The conference sessions overall were lively and well attended. One of my favorites was keynote speaker Joe Scarborough, co-host of MSNBC’s Morning Joe and a former member of Congress, offering his perspective on the current political climate. He was careful not to offer any predictions. But in the end he assured us that “Americans can be trusted to do the right thing… once they have exhausted all [other] possibilities.”

Another highlight of the conference was “Blockchain University,” a series of sessions intended to give participants an understanding of the technology behind blockchain and how it can be utilized in capital markets. For those of you who are not particularly sure what blockchain is all about (no need to be embarrassed, let’s be honest), I am probably not the right person to explain it, but I get the impression that blockchain today may be similar to what the internet was 25 years ago – we have a sense that it’s important, but few can yet explain what it is.

And thus another conference drew to an end. After four days of meetings and learning, it’s good to get back to work to find inboxes full of email and offices abuzz with activity. Certainly feels like 2017 is off to a good start. See you all at the next one!

New Year! New Administration! Same EB-5 Dilemma!

Since 2015, we here at Crunched Credit have tracked, followed and discussed the developments (or lack thereof) concerning the Immigration Investor Program, more commonly known as the “EB-5 Visa Program.” Throughout the past year, we’ve witnessed the approval of several extensions of the EB-5 Visa Program and in each instance, no substantive changes were included—these extensions were solely put in place in order to prevent the expiration of one of the most successful investment programs. Continue Reading

Alternative Facts? A World Without Dodd-Frank and Basel III

What if Dodd-Frank and Basel III were to largely go away? Eliminating Dodd-Frank has been a hobbyhorse of Representative Hensarling, the chair of the House Services Committee, for several years and has figured prominently in President Trump’s campaign talking points. But the conventional wisdom has been that any sort of transformational uprooting of the Dodd-Frank and Basel III thicket was unlikely.

That’s what I thought, too. In fact, I have bloviated to that point in the press and on podiums many times. From the moment when everyone’s thinking was refocused that November 9th morning, I had thought that while major disruptions of many things were in the cards, Dodd-Frank and the Basel III architecture really weren’t on the menu. Now I’m starting to wonder. Sure, I still think major retrenchment is not going to happen, but my conviction that it’s impossible is what now gives me pause. Let’s face it, while rarely in doubt, I’m wrong a lot.

So just in case I am wrong, yet again, and some version of repeal or replace happens for Dodd-Frank and Basel III is rejected or slow-walked to death, what might that mean? It’s time to start planning for alternative facts. Continue Reading

Substantive Consolidation: It’s Alive and Well (or Maybe Just Alive)

The doctrine of substantive consolidation (generally- the power of a bankruptcy court to consolidate the assets and liabilities of affiliated entities in bankruptcy) is a recognized remedy exercised by bankruptcy courts – one that strikes fear into the hearts of many lenders. Justifiably so. The doctrine can be employed to order the substantive consolidation of related-debtor entities in bankruptcy and it can also be employed to substantively consolidate the assets of a debtor in bankruptcy with those of a related entity that is not a debtor in bankruptcy. Picture this: A parent entity files for bankruptcy and all the goodies are in a series of subsidiaries and the companies have never respected corporate niceties. The bankruptcy court presiding over the bankruptcy of the debtor-parent entity orders that the non-bankrupt SPE borrower will be dragged into bankruptcy and its assets used to satisfy the creditors of both the SPE borrower and the parent. Ta da. Continue Reading

Dechert’s Financial Regulation Reform Tracker: An Essential Tool for an Uncertain Time

Financial Regulation Reform Tracker

The Trump administration and Republican Congress have big plans for the next four years.  The financial industry could face a complete policy 180 faster than the POTUS can tweet out 140 characters.  Or a delicately crafted executive order could have no actual real world impact at all.

To keep up with it all, we at Dechert are proud to introduce the Financial Regulation Reform Tracker, a tracking tool we developed to keep you abreast of executive actions, legislation and regulations from announcement to enactment and beyond.  Our Tracker aims to give you the right amount of information to help you understand what’s happening and how it could affect you.  Subscribe to receive email alerts with the latest developments or visit the Financial Regulation Reform Tracker website for more information.

For more information about finance, real estate and securitization matters related to our dynamic legislative and regulatory landscape, please contact Rick Jones or Devin Swaney.

What’s To Be Done about a Rule That Doesn’t Work?


Adding to the mountain of uncertainty for 2017 is how to interpret and implement (and…what is the fate of) the HVCRE (High Volatility Commercial Real Estate) regulations that came into effect January 1, 2015 (yup…that’s right…2 years and still no clarity) and which were implemented as part of the Basel III regulatory framework.  So what to do next? First, see the Q&A with the co-chairs of the CREFC HVCRE working group—Krystyna Blakeslee, Partner at Dechert, and Marci Schmerler, Shareholder at Carlton Fields—in the latest issue of CREFC World. And then, please don’t hesitate to contact Krystyna Blakeslee or Rick Jones to discuss HVCRE. For more background on the HVCRE regulations, see previous Crunched Credit posts here and here.

Hey Guys, Let’s Sue a Financial Institution! Our Government at Play

This is all about the difficulty of taking the punch bowl away from a roaring good party. Over the past several weeks a number of major banks folded under enormous pressure from the US DOJ to settle fraud claims resulting from the sale of bonds prior to the financial crisis of 2008. The allegations here were that, as they have been in many many cases over the past several years, the banks knowingly sold bonds backed by crappy residential mortgage loans. Apparently, no one else had a clue that this stuff was crap! Who knew? These last suite of deals were relative bargains for the banks because, reportedly, the DOJ was highly motivated to get these deals done before Mr. Trump took the helm at the White House.

For some reason this calmed investors’ concerns.

I don’t get it. Continue Reading