Priority: High Attachments: Broadleaf Analytics Group LLC — Preliminary Findings Summary (April 22, 2024).pdf
Ted and Patrick,
I am writing on an urgent basis in connection with Calderwood & Harkness Matter No. 1009-00005 to bring to Skybridge Fintech's immediate attention material findings arising from the independent loan-level due diligence being conducted by Broadleaf Analytics Group LLC on the receivables pool underlying the proposed $200,000,000 offering by SkyLend Receivables Trust 2024-1. Harrison Whitfield III of Whitfield, Drummond & Paige LLP joins in this communication on behalf of Halcyon Securities LLC in his capacity as underwriter's counsel. Given the significance of the findings described below, we are copying Tomás Reyes, General Counsel of Skybridge Fintech Ltd., directly.
**Summary of Broadleaf Findings**
On April 22, 2024, Sanjay Rajan, Managing Director of Broadleaf Analytics Group LLC, notified Halcyon that Broadleaf's re-underwriting analysis has identified material discrepancies between the static-pool performance data set forth in the Preliminary Offering Memorandum dated April 5, 2024, and the actual underlying loan-tape records for the receivables pool (cut-off date: March 31, 2024).
Broadleaf's analysis is based on a stratified random sample of 1,500 loans, representing approximately 6.5% of the pool by loan count (out of approximately 23,100 loans in the proposed receivables pool). The core finding is as follows: the servicing data provided by Clearview Loan Servicing, Inc. (Servicing Account No. CLS-SBF-2022-0041) appears to have applied a payment-application waterfall that differs from the contractual waterfall specified in the Master Servicing Agreement dated October 1, 2022. Specifically, Clearview appears to have applied partial payments to principal before interest, rather than in the contractual order required under §4.03 of the MSA (interest → fees → principal). The practical effect of this misapplication is to understate both delinquency and cumulative net-loss figures in the servicing tapes provided to all transaction parties.
**Quantification of Discrepancies**
The discrepancies identified by Broadleaf are substantial:
- **30+ Day Delinquency:** Reported at 3.21% in the Preliminary OM and in Clearview's servicing data. Broadleaf's re-underwriting indicates the correct figure is approximately 5.47% — a discrepancy of 2.26 percentage points, representing a roughly 70% relative increase.
- **Cumulative Net Losses (2022 Origination Vintage):** Reported at 4.12%. Broadleaf's analysis indicates approximately 6.89% — a discrepancy of 2.77 percentage points, representing an approximately 67% relative increase.
Broadleaf estimates that the payment-waterfall error affects approximately 14,600 loans, which represents approximately 63% of the proposed receivables pool.
**Implications**
Halcyon notes the following with serious concern:
The static-pool performance tables contained in the Preliminary OM were relied upon by both Meridian Credit Ratings, Inc. and Carrollton Ratings Group LLC in their preliminary and expected rating analyses. These tables were presented to both rating agencies on April 8, 2024. The same performance data was distributed to 28 institutional investors during the investor roadshow conducted April 15–19, 2024.
Halcyon has serious concerns regarding the integrity and accuracy of the data underlying the offering materials and the potential implications under the securities laws for both the issuer and the initial purchaser. Discrepancies of this magnitude, if confirmed, would constitute a material adverse change in the characteristics of the receivables pool and would be directly relevant to the representations and warranties made, or to be made, by Skybridge Fintech and the Depositor under the Preliminary Purchase Agreement and the Sale and Servicing Agreement.
**Immediate Requests**
Halcyon requests that Skybridge Fintech and Calderwood & Harkness take the following actions immediately:
1. **Root-Cause Investigation.** Immediately investigate the root cause of the discrepancy, including direct engagement with Clearview Loan Servicing, Inc. (Meredith Sloane, VP Operations) to determine when and how the payment-waterfall error was introduced into Clearview's servicing systems.
2. **Scope Determination.** Confirm whether the discrepancy is limited to the proposed securitization pool or extends to Skybridge Fintech's broader serviced portfolio (approximately $640 million under Clearview management as of December 31, 2023).
3. **Document Preservation.** Preserve all loan-tape data, servicing records, and system-migration documentation, including without limitation any records relating to Clearview's June 2023 platform migration from LoanTrax to ClearCore, which Broadleaf has identified as a potential source of the error.
4. **Written Response.** Provide Halcyon and Whitfield, Drummond & Paige with a written response within 48 hours (i.e., by 5:00 PM EDT on Thursday, April 25, 2024) setting forth Skybridge Fintech's preliminary findings and proposed remediation plan.
Broadleaf's preliminary findings summary is attached for your review.
**Reservation of Rights**
Halcyon reserves all of its rights under the Preliminary Purchase Agreement, including without limitation its rights under the force-majeure and material-change provisions. Halcyon is currently evaluating whether continued marketing of the offering is appropriate in light of these findings and will communicate a separate determination regarding the status of marketing activities in due course. Nothing in this email is intended to waive or modify any of Halcyon's rights or remedies, whether under the Preliminary Purchase Agreement, at law, or in equity.
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We would like to schedule a call at the earliest opportunity to discuss these findings and the path forward. We would propose tomorrow morning, April 24. Ted, could you please coordinate availability among your team and Tomás's office and revert?
Thank you for your prompt attention to this matter.
Best regards,
**Rebecca Thornton** Managing Director Halcyon Securities LLC 200 Vesey Street, 42nd Floor New York, NY 10281 Tel: (212) 555-0147 Email: rthornton@halcyonsecurities.com
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*Harrison Whitfield III, Partner, Whitfield, Drummond & Paige LLP, 51 West 52nd Street, New York, NY 10019, joins in this communication as counsel to Halcyon Securities LLC.*
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