Fitch Affirms Hudson Advisors Germany at 'CSS1-'
HAG remains the largest Fitch-rated German special servicer by assets under management (AUM), with a servicing portfolio of EUR833m at June 2015. This has reduced from EUR1.2bn at end-June 2014 and a high of EUR5.6bn in 2008. The decline reflects the difficult German NPL portfolio market in recent years, with no new portfolios boarded since December 2011, but is also evidence of HAG's continued ability to work out difficult loans and assets.
Fitch considers the current portfolio size as adequate; however, a decline may have a negative impact on the servicer rating. The non-German portfolio serviced by HAG has grown to EUR1.3bn at end-June 2015, from EUR914m a year ago, which Fitch deems to be an indication of the sustainability of the business.
The affirmation takes into account HAG's significant work-out experience. The servicer continues to demonstrate the effective use of a wide variety of judicial and non-judicial work out methods. As the German market has evolved, HAG has adapted its work-out strategies to good effect.
HAG has now completed the restructure of the business, which saw a reduction in servicing employees to 61 at June 2015, from 81 a year ago. Fitch considers the restructure as well managed. The affirmation reflects the staff's stable industry experience and tenure levels, which continue to compare well with peers and reflect HAG's ability to retain key staff.
Since June 2014 the business has continued to consolidate corporate functions to Hudson Advisors Europe Limited (HAEL), Dublin, which hosts the shared service centre for the group. The Hudson group continues to standardise and centralise activities where possible, while maintaining local expertise where appropriate. HAG is supported by group level functions and has the flexibility to easily upscale according to new business requirements or transfer resources as necessary.
Hudson has a robust group risk management approach and the bespoke Hudson developed Asset Management System Solid technology systems are supported by recent enhancements and robust disaster recovery, business continuity and IT security plans. In deriving its servicer ratings, Fitch gives more credit to such group resources as they imply a wider range of knowledge and expertise that are available to the servicer.
HAG lacks the support of a highly rated parent. However, Hudson's solid financial performance over the past 17 years and the company's strong relationship with Lone Star Funds (LS) mitigate any financial concerns.