GlobalCapital sat down with Latham & Watkins structured finance partners Franz Ranero, a CLO specialist, and Jeremiah Wagner to discuss Ranero joining the firm from A&O Shearman in April. They also discussed what the leaked European Commission papers on securitization regulation will mean for the market.
GlobalCapital: Why was now the time to join Latham?
Franz Ranero: We identified over the past handful of years that the structuring tools of the CLO market are becoming of interest in the broader private capital sphere. These previously esoteric techniques are being used by private capital firms to find more efficient ways to finance their fund strategies.
Latham had also identified that very trend, which then feeds into their market-leading global coverage across the full fund lifecycle and financing options. So there was a very significant meeting of minds.
Notwithstanding the upheaval of moving the practice and team en masse, particularly from a personal perspective after nearly 25 years at the same shop, the move simply made sense.
Jeremiah Wagner: It helps us connect all of the skills our clients are looking for. It will allow us to extend a lot of the work we are doing. We see opportunities to work on cutting edge transactions and this helps to ensure that our expertise extends to all facets of the asset-backed finance space. This addition puts us at the very top of size and scale in the City.
It sounds like this move is about more than just CLOs?
Ranero: We have a pre-eminent position in the public CLO market, and we will certainly retain and continue building on that. But the real growth will be outside those public markets, which is where Latham’s ties with sophisticated private capital investment firms can be brought to bear at an institutional level.
What did you think of the leaked policy papers from the European Commission?
Ranero: The main change is that CLOs will be treated as public securitizations. That is obvious and manageable, and it is appropriate from a policy perspective. The rest is helpful, with some softening of overly prescriptive due diligence. No big bombshells, unlike the prior paper [from the European supervisory authorities].
You're talking about the changes to risk retention rules in April. Has the market worked through that now?
Ranero: It was a prime example of the extraordinary resilience of the market. The market paused to gather itself, but within a few weeks every single manager we work with had a viable strategy to move forward. It differs across each institution.
How about the Capital Requirements Regulation paper?
Wagner: Of the proposals this is the one I’m most excited about. Some of these changes really can free up more capital for the market. We still need to see what some of the key proposals will be. They do seem to be listening to some of the arguments on the prudential side. It’s definitely a good first step, but I think there’s still more to be done.