Another Fine Mezz

An interview with Propel and the BBB, a busy Q1 for ABS, more arb headaches for CLO managers

The rise of the European master trust and the CLO market nears shut down

Leasing ABS thrives, private credit worries and CLOs widen

The fallout of MFS entering administration, how Iran war is affecting the market and CLO managers’ software headache

Vervent explains how Tricolor warehouse and ABS deal servicing work.

David Johnson, chief executive of Vervent, joined Another Fine Mezz at the SF Vegas conference to talk about its work keeping cash collection going following the bankruptcy of Texas-based sub-prime auto lender Tricolor last September.

Johnson told senior securitization reporter Chadwick Van Estrop that at the time of the bankruptcy filing, about 10,000 cars, some pledged as collateral against warehouse or ABS lines of credit, were found in Tricolor’s possession across dealerships, workshops, storage lots and auction houses.

All those cars have now been sold, and the associated funds are in Tricolor’s accounts, according to Johnson.

How those funds are distributed will be determined by a Texas bankruptcy judge, the bankruptcy trustee and a court case in the Southern District of New York, where founder and CEO of Tricolor, Daniel Chu, and three other executives were charged with “systematically defrauding Tricolor’s lenders”.

In the weeks after the bankruptcy filing, the trustee overseeing the process went to a Texas court seeking access to about 100,000 loans reportedly originated by Tricolor.

But Johnson told GlobalCapital that the actual number of loans Vervent found and brought into its systems during its servicing work was about 70,000.

The difference is where allegations of double pledging of loans have been made.

Johnson said the Tricolor Chapter 7 bankruptcy was the “largest in history” and the subsequent document sampling to test the strength of a securitization collateral pools have risen from as low as 10%, in some cases, to about 100%.

The executive touched on why Vervent hired 26 of Tricolor’s back office staff, and about 150 call center workers in Mexico, after the bankruptcy filing, and the moves made to keep money flowing into the company that could be made available to warehouse and ABS lenders.

Podcast outline

• 0-6 minutes: systems to prevent double pledging of assets
• 6-14 minutes: Vervent’s servicing work for Tricolor to now
• 14-19 minutes: the future of Vervent’s servicing for Tricolor

GlobalCapital’s reporting on the Tricolor fiasco

• Tricolor collection accounts believed to hold $100m
• Probe to confirm if Tricolor auto loans canceled when cars repossessed
• Back-up servicer moves in on Tricolor's delinquent-heavy auto ABS
• Tricolor auto loan fiasco puts ABS practices on trial

The fall of Market Financial Solutions and Ares’ second private credit CLO

A spokesperson for Market Financial Solutions told GlobalCapital last week that the firm's founder Paresh Raja “categorically denies any allegations of fraud”.

Adam Reeds joins Another Fine Mezz to discuss pioneering deal

On the back of pricing the first ever Bitcoin loan asset-backed securitization last month, Ledn co-founder and CEO Adam Reeds sat down with GlobalCapital’s senior reporter Chadwick Van Estrop at SF Vegas to talk about the deal and the outlook for the company in the ABS market.

Reeds revealed Ledn’s next ABS deal could come as soon as six months from now if originations reach a critical mass.

In the interview he responded to market concerns about the custody of the Bitcoin that backs the ABS.

Reeds also touched on Ledn’s outlook for refinancing the ABS deal before the end of the three-year revolving period. “It very much will be dependent on other types of capital available three years from now,” he explains. “As it stands, currently, I can see us refinancing and keeping this going in perpetuity.”

Reeds touched on why he viewed Ledn’s speed of liquidation as a strength for its ABS and revealed that Ledn’s borrowers are not mandated to pay their loans back down to a 50% loan-to-value ratio if the LTVs rise above 70% and 75% as the price of Bitcoin falls.

With about one third market share of the Bitcoin-backed consumer lending sector, Ledn plans to double its loan book this year. Last year it originated $100m to $150m of Bitcoin-backed loans a month with about $1bn of loan principal and interest outstanding at year end. Reeds explains why Ledn is confident about achieving this.

Podcast outline:

0-12mins: Ledn’s business model and Bitcoin backed lending

12-24mins: ABS deal details

24-29 mins: Future of the ABS platform

UK regulations take shape, software slide tests CLO managers’ mettle and how captive equity is distorting the market

Structured Finance Association CEO Michael Bright previews major industry event

CLO triple-As finally tighten and a template established for European data centre ABS