If you have no idea what I'm talking about, then boy do I have a reading list for you (start here).

I’ll summarise as best I can. Rizwan Hussain was a structurer / mortgage trader at StormHarbour Securities, RBS, and Citi until around 2012, when he set out his own stall under the name Clifden Holdings, and tried to execute various deals, including the purchase of a portfolio of equity reversion loans from Grainger.

Later on, he tried to sell, and subsequently seize, a portfolio of mortgages belonging to Paratus, securitised in deals from the RMAC shelf, through a tender offer that would have blocked the bonds in the clearing system, but which he had no intention of settling (and no money to settle). This approach of selling assets he never actually owned is... unorthodox, and won him the lasting hatred of large portions of the market. This was only enhanced by Fortress, the owner of Paratus at the time, making it clear that no counterparty or adviser to Rizwan would be working in this town again.

Then followed a spate of attacks on various portfolios of legacy UK securitisations and various originators, interrupted by a spell in prison (for contempt of court following non-payment of rent on a swanky riverside apartment).

These attacks generally followed a pattern in which Rizwan, his associates, aliases, various special purpose vehicles from the Isle of Man, Mauritius and the Maldives, impersonated the legitimate directors of a securitisation SPV and purported to direct enforcement or an asset sale. The poor unfortunate corporate services professionals whose names appear on hundreds of securitisation entities were suddenly summoned to court to answer a flurry of lawsuits, and their firms shelled out big time on legal fees.

Rizwan et al were generally self-represented, sometimes absent entirely — though there is an interesting coda in one of the judgements explaining how some of his court fees were funded.

From “Intensity Holdings SA vs Stratton Mortgage Funding 2019-1”.

“A fee account customer application form was created by Mr Hussain to pay court fees to His Majesty's Courts and Tribunals Services ("HMCTS"). Mr Hussain applied for an account to be set up to enable a payment by account arrangement for the payment of court fees. He did so in the name of "Clavis Securities Plc", but giving his own name and stating in a declaration that he was a director of Clavis. He also signed a direct debit form in favour of HMCTS in support of the payment by account arrangement. Those documents were dated 10 May 2021. As I have already explained, there is clear and uncontroverted evidence that the directors of Clavis were and remain Ms Whitaker and the two Intertrust companies. Mr Hussain has never been a director of Clavis. Despite this, the unauthorised direct debit account was utilised and Mr Leyland explains that over £250,000 of court fees have been paid through the payment-by-account account in this way. He says that this may explain how Mr Hussain and his proxies have been funding the many vexatious claims that he has been involved in. It is a matter of real concern that it appears that many proceedings may well have been funded by monies extracted from Clavis, an innocent securitisation vehicle.”

Most of Rizwan’s activities have been concentrated on securitisation vehicles, but he’s also tried an attack on Hurricane Energy, an AIM-listed oil E&P.

This failed and the court ruled, in no uncertain terms, that him and his various associates and vehicles were not directors of Hurricane.

Among the list of names was Gary Fung and Gary Gar Jung Fung (possibly the same person).

This person is now the sole director of what appears to be a defunct crypto and FX brokerage, Startrader Pro. This vehicle, unlike any of the previous Rizwan-associated vehicles, has an FCA licence, although it has applied to cancel its authorisation, and the FCA register notes that “The ‘firm detail’ displayed on the register may no longer be correct… the FCA is addressing this with the firm”.

It appears that the ‘Gary Fung’ takeover occurred last year, based on Companies House records.

A FCA-licensed firm represents a new approach for Rizwan, but it’s unlikely to be sufficient. None of his trades worked, but the ones which came closest relied on the element of surprise.

The public launch of the RMAC tender came from an unknown firm, Clifden IOM Holdings, but it had a securitisation big hitter, Robert Palache, listed on its website, which gave it a veneer of credibility. Research desks at the time pored over the deals in question wondering what the angles were; it only became apparent over a couple of months that the tender itself never really existed.

High Court judges have become increasingly impatient with the flood of similar lawsuits, more inclined to toss cases quickly and make sweeping rulings protecting SPVs and their directors.

The rest of the securitisation ecosystem is also wise to the Rizwan playbook by now; corporate services firms will be straight off to court to get protection at the first hint of trouble, RNS publisher EuroNext is quicker at binning questionable notices, investors are unlikely to tender bonds into unknown hands.

One also wonders what the point of all this activity is, given the track record so far. Early career Rizwan was a successful and skilled structurer, a profession which is fairly well-remunerated. Maybe he could have gone buyside, maybe he could have climbed the ranks at an investment bank; either way he’d be pulling down some decent comp rather than launching lawsuits.

The regulation is secret and there’s nothing you can do about it

IMN (now Invisso!) ran its always-excellent SRT Symposium last week, marred only slightly by my moderation for the final panel of the day. It was probably the most cheerful securitisation conference I’ve been to in 14 years of covering the market; being part of a market that’s growing 30% a year probably does tend to lift the spirits.

I’ve done a full writeup here, looking at nine of the big themes — let me know if you’d like a copy and you’re not a subscriber — but one structural element that came out was the US regulators’ resistance to regulatory call language.

Under US bank capital rules, the only calls allowed in SRT deals are clean-up calls (redemptions when a deal has amortised down to below 10%, basically to avoid the admin hassle of a lot of small deals hanging about indefinitely).

Redemption mechanics are heavily specified and regulated in SRT deals everywhere. The UK’s PRA certainly used to prohibit time calls (redemption after an amount of time), while the European Banking Authority SRT guidelines recommends only time calls after the initial weighted average life of the deal.

These guidelines also have reservations about the structure of regulatory calls, noting “an SRT call during the lifetime of the transaction due to SRT being unwound might be problematic, as it might be used to circumvent the general restriction on time calls for traditional securitisations, as well as the restrictions on time calls for synthetic securitisations”.

The EBA also warns the “originator’s call provide additional credit enhancement in favour of the investor and to avoid allocating losses that the investor should be absorbing. Particularly in bad times, originators may be incentivised to exercise the call options to support investors and/or maintain a positive business relationship. During the last financial crisis, several originators exercised call options as the performance of the securitised portfolio deteriorated, effectively taking back on their balance sheet the risk that they were deemed to have transferred”.

But no regulatory calls, potentially no grandfathering, and an absolutely massive regulatory shift coming down the tracks for next year is a potent and unpleasant combination. The Basel Endgame is a massive topic (as will be familiar to viewers of Sunday night NFL games) and it might well be heavily altered before implementation in the US.

There’s really no way of knowing exactly what it will look like (and the details really matter for SRT) and no easy way to structure deals for maximal efficiency under a yet to be specified regulatory regime.

The actual language of regulatory calls can vary; how much capital relief does a regulated entity need to lose before it can call a deal under the Regulatory Event? How material must a regulatory change be?

Santander, very sweetly, publishes some of the deal documents for its SRT deals; here’s the Regulatory Event Language in Magdelana 7, in which it appears that “material” is doing a lot of work. “Materially greater” and “material adverse change” seem to be the key provision; these are terms which have a ton of legal precedent around them, and should serve to circumscribe the originator’s flexibility.

Anyway, partly as a consequence of the lack of other calls, the US banks have been issuing short-dated static transactions which shouldn’t overlap too much with any regulatory change (Basel Endgame is supposed to come in July 2025). Combined with the required thick tranches (0-12.5%) under US rules, and you have a market that looks genuinely quite different to the longer-dated and more levered European market — and which is potentially more transactional.

My panel at the end of the day featured some of the market’s largest European originators, in the shape of Barclays, Deutsche Bank, Intesa Sanpaolo, and Société Générale. Panellists generally agreed that doing SRT deals could not be a purely transactional process between counterparties; it needs trust from both sides.

But one major reason for issuers to take a trust and relationship based approach to SRT investors is because deals often need amendments during the lifetime of the transaction. If the US market is focused on quite similar IG corporate static deals, with short lives, that could allow a more ruthlessly economic attitude to take hold.

Stomping on Project Savoy

The troubles of debt collection firm Intrum are rapidly evolving, with the company getting on a call Monday to try to reassure investors that everything was copasetic and it had appointed Houlihan Lokey and Milbank for perfectly sensible reasons and not to hatch a dastardly scheme to hose bondholders. See 9fin’s transcript hereplus some more info on the array of advisory appointments across credit groups here.

Chief executive Andres Rubio took the opportunity to talk up the business, especially the quality of the servicing business (there are definitely some gems there) and to point out that the company will start to see some real juice from its joint ventures in the medium term.

The biggest of these is Project Savoy, an originally €10.8bn GBV portfolio from Intesa Sanpaolo, which already tripped Intrum up with two big writedowns in 2022, and a costly contract with CarVal to unwind.

Anyway, happily this is securitised in Penelope SPV, a GACS securitisation, which has some publicly available reporting out there courtesy of the rating agencies. In some ways it is a classic underperforming GACS deal — it’s around 30% behind initial business plan overall, and things look to be getting worse; in the last reporting period collections were less than 50% of budget.

Cashflows to the mezzanine and junior switched off in autumn 2022, just three quarters after the deal was restructured, but the senior is still paying down, and probably faster than originally intended, given that there’s no junior cash leakage.

It’s not clear from the public reporting whether it is underhedged but, in common with other GACS deals, it has a Euribor cap which amortises at a fixed schedule based on the intended paydown of the senior notes.

Barring a big turnaround in collections performance, it’s hard to see much cash flowing through before late 2026 — which is after Intrum’s big RCF maturity in January of that year. Rubio’s not wrong to say that there’s value there and (eventually) cashflows; these just won’t turn up until Intrum has already addressed its capital structure, one way or the other.

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