Four ex-Signature Bank employees are said to be heading to a regional bank in Charlotte, North Carolina, to start a new subscription credit line lending program, according to people familiar with the matter.
Brad Boland and Charlie Owens, both managing directors in Signature’s fund banking division, as well as managing director and head of portfolio management William Runkle and director Brian Williams, are all said to be moving together to start the platform.
The four bankers are well known in the fund finance market. Their last day at Signature was in the final week of May, according to one fund banker source. None of the bankers responded to requests for comment.
While it is not known which bank the group is going to, contenders could include the likes of Sandy, Utah-based Ally Bank. Ally, and its predecessor GMAC, has been an issuer in the auto asset-backed securities market since before the great financial crisis, and has a Charlotte office. Fifth Third Bank, headquartered in Cincinnati, also has an office there, and has been active in auto ABS since 2017. Neither of those banks responded to requests for comment.
Fund finance market participants often compare the credit quality of sub lines to that of prime auto ABS, which are considered to be among the safest, and lowest yielding, securitization asset classes. Although the sub line market has a significantly shorter history, there have only been a small handful of defaults. The most well-known defaults were both due to instances of large-scale fraud on the part of the borrowers: the Abraaj Group and a small manager called JES Global Capital, whose founder was given a 97-month prison sentence in May last year.
Whichever bank it is, it is likely to want to pick up market share from the likes of Silicon Valley Bank, Signature Bank and First Republic Bank, which all represented among the biggest lenders to the mid-sized sponsor market. The uncertain futures of SVB’s and FRB’s sub line platforms, and the failure of Signature, have put further strains on an already supply-constrained market.
“My guess is their mandate is to go after right down the fairway deals for mid-sized sponsors,” the fund banker source said.
San Diego-based Axos Bank also recently launched an effort to enter the sub line market, initially with the hire of former Signature fund banker, and one of the bank’s fund banking division’s founders, Trevor Freeman. He has since begun expanding his team there. Market buzz is that other potential lenders are also planning new platforms.
SVB and First Republic Bank were rescued by First Citizens Bank and JPMorgan, respectively, after runs on deposits caused by long-term asset/liability management issues created by quickly rising rates.
The Signature bankers were technically employees of the bridge bank set up by the Federal Deposit Insurance Corporation to hold a portion of Signature’s loan book, including sub lines. The rest of the bank’s loans, deposits and branches were sold to New York Community Bancorp. The acquired branches are operating as Flagstar Bank.