Stone Mountain Capital Shortlisted For Alt Credit Intelligence European Service Awards 201728/9/2017
An increasing number of middle market direct lending fund managers are employing securitisation technology to facilitate the ramp-up and marketing process for their funds. By employing a structure similar to a CLO warehouse, the direct lending funds can be more easily marketed across Europe, while also posing regulatory capital benefits to investors. According to Oliver Fochler, managing partner and CEO of Stone Mountain Capital, a number of managers have set up - or are in the process of setting up - CLO-type structures in order to ramp up mid-market direct lending portfolios. These structures are typically domiciled in Ireland, Malta or Luxembourg. "If the direct lending fund is structured as a securitisation, investors have the option of buying a note as debt rather than shares as equity," said Mr. Fochler. "Under Solvency II there's a benefit of investing in a securitisation over a fund because of the solvency capital ratio. A securitisation structure also typically comes with fewer marketing restrictions than an AIF." Mr. Fochler said he does not anticipate a resurgence of European middle-market CLOs like those seen pre-crisis, however. The direct lending CLO structures or securitisation companies currently in use are, unlike traditional middle market CLOs, not tranched. Structures are also typically unrated and placed in the private market. Stone Mountain Capital has recently structured an in-house European Direct Lending Fund for lower middle-market corporates in AIF format with an associated securitisation vehicle. Interview with Oliver Fochler was covered on 17th July 2017 in Capital Structure under 'CLO Warehouse Structures Providing Ramping And Marketing Benefits To Middle-Market Direct Lending Funds' (website requires registration).
Recent speculation that Deutsche Bank could be selling its Polish unit has highlighted the FX issues associated with shedding non-core mortgage assets in the country. Roughly a third of Deutsche Bank Polska's assets are said to be euro- and Swiss franc-denominated mortgages, the sale of which is likely to be challenged by the Polish regulator in an effort to maintain financial sector stability. Poland has been grappling with Swiss franc- and euro-denominated mortgage loans since the financial crisis. More than half a million Poles took out Swiss franc mortgages before the crisis to benefit from lower Swiss interest rates. Stone Mountain Capital ceo Oliver Fochler notes that while the books are "highly distressed", based on the appreciation of the Swiss franc, the underlying credit quality "might be good". Interview with Oliver Fochler was covered on 21st November 2016 in Structured Credit Investor (SCI) under 'Currency Risk Hindering Polish Mortgage Portfolio Sales' (website requires registration).
Underperforming loans in the shipping sector have skyrocketed since 2008, as shipping operators have been challenged by overcapacity and untimely investments in bigger container vessels in the wake of the financial crisis. This has left banks in the US$400bn market with the challenge of offloading a string of non-performing loans. Pillarstone's business model regarding non-performing loans entails taking control of troubled firms and turning them around with new capital from KKR. The novelty is in the management of the bank loans, with the goal of attaining repayment and giving banks part of any extra profits. The firm's business model involves, as one Pillarstone representative tells SCI, "governance and management of the loans, without taking them off the banks' books". Oliver Fochler, managing partner and ceo of Stone Mountain Capital, echoes a similar view when he states that private equity firms are "managing and restructuring" such capital-intensive assets. He adds that there is nothing surprising here, given the "tendency of private equity firms - within their newly founded debt units - to move towards high-yielding NPLs and private debt, due to yield compression." Interview with Oliver Fochler was covered on 10th November 2016 in Structured Credit Investor (SCI) under 'KKR targets shipping loans' (website requires registration).
Acquisition International Announce the Winners of the 2016 International Finance Awards Stone Mountain Capital is the winner of 'Best Independent Alternative Investment Boutique - UK' in Acquisition International's 2016 International Finance Awards.
It is almost two years since the transitional period for AIFMD expired in Europe and the majority of AIF managers now consider themselves to have addressed the Directive’s requirements. However, as evidenced by regulator-imposed penalties in France, a number of managers have failed to implement adequate valuation controls. Over the past 24 months the French regulator, the AMF, has sanctioned a number of investment managers for significant failings in valuation practices. Penalties were particularly severe for those firms whose failings led to subscriptions in redemptions on false NAVs, and ensuing financial losses for investors. Interview with Oliver Fochler was covered on 3rd May 2016 in PriceABS Insights, Structured Credit Investor (SCI) under 'Compromised Compliance - Buyside Valuation Controls Scrutinised' (website requires registration).
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