Structured Credit Case Studies

See how we are setting the standard for debt infrastructure and execution

Multiple Needs, Single Solution

When the borrower of a multiple-tranche loan from a 320-lender syndicate was forced to restructure the debt, it spelled trouble for the role of agent, which had been filled by the syndicate's lead arranger. The restructuring process made it clear that the various lender groups in the syndicate had different priorities. The restructuring interests of senior lenders differed from those of mezzanine lenders, whose interests in turn differed from the interests of second-lien lenders. Citing clear conflict of interest, the agent resigned from representing all but the senior loan financing, and the syndicate suddenly found it needed replacement agents for the lender groups for the two other tranches.

Attorneys for several of the second-lien lenders recommended BNY Mellon Corporate Trust. As the pioneer in the field and the largest third-party administrative agent in the industry, it was the obvious go-to provider. Perhaps more important was BNY Mellon Corporate Trust's well recognized independence; it meant the division could represent the lender groups of not just one but both financings — mezzanine and second-lien — thereby providing a single solution for multiple lenders' multiple needs.

The Bank of New York Mellon Corporation and its subsidiaries may lend and provide other products and services to securities issuers and others, and provide and receive related fees and compensation related thereto.

Out of Confidence and Almost Out of Business

When the collapse of Lehman Brothers sent ripples of uncertainty throughout the bond market, one product that looked like it might be swamped was catastrophe bonds — cat bonds, the reinsurance alternative that transfers insurers' disaster-driven losses to investors. Unsure how to track underlying collateral, investors suddenly seemed to have lost confidence in the very structure of these instruments. Without that confidence, the cat bonds' credit risk just looked too high, and insurers worried they had lost this valuable means of financing.

Enter the savvy, innovative, and flexible professionals of BNY Mellon Corporate Trust. Working with two separate insurance bond issuers in the first half of 2009, they enhanced the cat bond structure, initiating a new standard of transparency and establishing procedures for effecting the standard. With Web site reporting on certain aspects of the bond's collateral assets, investors had the clarity and transparency they sought — and cat bonds were back in business.

An Institution in Trouble

A large European financial institution was sufficiently plagued by distressed assets on its books that it asked the central bank of its home country to step in. Under the terms agreed, the central bank would create a master fund comprising five grantor trusts and one LLC as buyers of the distressed assets. The financial institution's balance sheet risk would thus be minimized, and the master fund would securitize the assets to capitalize the equity.

All that was needed — and it was needed fast — was a trustee with three attributes: adequate financial strength, the full range of varied capabilities required to structure and administer the master fund, and the kind of global reach and local expertise that would enable it to step in quickly and do the job right.

BNY Mellon Corporate Trust met all the qualifications. In a short period of time, the division was serving as trustee, master servicer, and data aggregator of the fund. A legendary European financial institution's balance sheet was stabilized, its capital ratios strengthened, its longevity and effectiveness reclaimed.

Outsourcing Needed

When a large government purchaser of U.S. whole-loan mortgages needed to reduce costs and avoid capital outlays, it decided that one good way to do so would be to outsource its document custody function.

But there were challenges.

First, the document custodian would have to produce a series of customized reports to accommodate rigorous mortgage market controls. Second, the amount of files involved was huge — several million. In addition, speed was of the essence: the government agency needed to transfer the first million files within three months! Speed, volume, and customized services: a tall order for any document custodian.

Because of its wide-ranging experience in serving government agencies, BNY Mellon Corporate Trust was appointed by this government purchaser. A dedicated team from the division quickly put together all needed capabilities in an innovative solution that met — and exceeded — the challenges. The solution comprised document custody and tracking, the review and certification of all documents, safekeeping, and loan-level and aggregate performance tracking across the portfolio.

As for the first million files that needed to be moved in three months, the team got the job done in less time than that.