CRE Finance Council

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On October 20th at the Charlotte City Club, Dechert partner David Harris spoke on an ASF Sunset Seminar panel titled “FDIC’s Final Securitization Safe Harbor – Understanding the New Rules.”  I won’t spend too much time on the background of the FDIC’s Old Safe Harbor Rule but will tell you that the Transitional Safe Harbor Rule continues to have a place even though we have a New Safe Harbor Rule (adopted on September 27, 2010), because the New Safe Harbor Rule extends the Transitional Safe Harbor Rule so that transfers of assets into securitizations made on or prior to December 31, 2010 are permanently grandfathered and not subject to the conditions of the New Safe Harbor Rule.  Following?
Continue Reading Securitizations: An Old Rule, a Transitional Rule and a New Rule (and we’re not talking Good, Better, Best)

Covered bond legislation is once again a hot topic on Capitol Hill. Representative Scott Garrett (R-NJ) co-sponsored the latest iteration of his proposed legislation (United States Covered Bond Act of 2010 or H.R. 5823 (pdf)) along with Representatives Kanjorski (D-NJ) and Bachus (R-AL). The House Financial Services Committee recently voted in favor of reporting H.R. 5823 to the full House of Representatives for consideration, which hopefully will be taken up for a vote this fall shortly after the August recess.Continue Reading Covered Bonds Anyone?

It’s August 6 as I write this, and the finance industry is taking a deep breath after hustling for weeks to get their comments delivered to the SEC on the SEC’s massive restructuring (pdf) of Reg AB and offering reform.  We here at Dechert had been very busy writing the CREFC comments (pdf) and I’m delighted to see that effort coming to a close (it only took 24 drafts to get to our submission).

To be clear, this is merely the opening act of what will be a protracted insect dance between business and government to settle on rules that deliver on the SEC’s goals of transparency and alignment between issuers and investors while not imperiling the restoration of a healthy CMBS market.  This process will consume the time of many of us for the indefinite future.Continue Reading And Now the Real Game Begins

Issuers, investors, rating agencies and other industry participants continue to wrestle with the fundamental changes that will come to define CMBS 2.0. Among the (many) issues raised in the "Best Practices" guidelines issued by CREFC during June’s get-together was a proposal for market-wide, programmatic change to the package of representations and warranties given by securitization issuers. Specifically, investors are calling for the formulation of a market standard list of reps and warrants, and for a standard procedure for receiving any deviations on a deal-by-deal basis. One would hope this would sate the appetite of the investing community – a community ravenous after being starved of ground lease exceptions and knowledge qualifiers during the lean years.Continue Reading Industry Considers CMBS 2.0 Rep Package

Earlier this week, Representative Scott Garrett (R-NJ) introduced an amendment to the proposed financial reform legislation that will establish a regulatory framework for a covered bond market in the United States.  The House side of the reconciliation committee quickly passed the measure – the Senate side is now considering it.  This development is welcomed news to a banking industry that has craved a covered bond market for some time now.  For our part, we’ve been examining covered bond structures since the advent of the credit crises as our clients continued to try to devise a workable structure, so we’re very excited by this development. 

Covered bonds, which have been part of the European financing vernacular for over 200 years, function as a cross between an unsecured corporate bond and an asset-backed security.  Typically, a financial institution will issue a direct-recourse bond which is also secured by a specified pool of assets that remain on the financial institution’s balance sheet.  These are attractive to investors for many reasons, most important of which is that the investor has recourse to a specified pool of assets in the event the financial institution becomes insolvent, unlike typical unsecured corporate bonds that depend solely on the issuer’s credit.Continue Reading Reconciliation Update: Covered Bonds

I write from CREFC’s annual do with my 800 or so best friends.  We are trying to party like it’s not 2009, and you know, we’re getting there.  The government’s still playing pin the tail on the regulatory donkey, Europe’s a mess, housing and employment are not ready for prime time, and the banking system hangover goes on.  Yet…JPM got a deal done, the bonds cleared, and pricing was… well, it’s been reported that they made a few bucks.

The CREFC convention kick off is the Monday night parties, of which yours truly was a host of the annual Dechert dinner.  Note I said parties with an “s”.  We’ve had a banker party drought these past few years. I see the return of the Street parties as a leading indicator of CMBS 2.0.  We cannot wish 2.0 into existence, but let’s face it:  A robust appetite for anything to invest in with yield measured in percentage points not basis points plus good vibes can a market revive.
 Continue Reading Partying Like it’s not 2009

I’m just about to do another CRE Finance Council (formerly CMSA) PSA after work tutorial. A couple of observations. As a lawyer who packed the sausage casings, it is startling to see how much uncertainty and, in fact, misinformation exists about how a PSA actually works in the community of people who buy and sell bonds and other financial assets. Perhaps not surprising, because who reads these things, except the lawyers who draft them and a few anal B piece buyers, who really need a life? Continue Reading Time to Read that PSA