400 Capital Completes Capital Relief Deal on $1.5B Mortgage Portfolio
400 Capital Management has closed a pair of linked capital relief transactions referencing a $1.5 billion portfolio of residential mortgage loans held on the balance sheet of OceanFirst Bank, in what the firm believes is the first fund-issued, rated mortgage significant risk transfer transaction completed in the U.S. market.
The structure was executed in two parts. The first transaction was a credit default swap directly between 400CM and OceanFirst Bank, providing the bank with regulatory capital relief and risk transfer through a non-dilutive arrangement. The second transaction issued credit-linked notes rated by DBRS Morningstar, referencing the CDS — creating rated securities that institutional investors can access with exposure to U.S. residential mortgage credit.
“We are providing U.S. banks with flexible, non-dilutive capital relief solutions, while creating well-structured, rated bonds that institutional investors can invest in with confidence,” Jeff Willoughby, head of residential credit strategy, 400 Capital Management.
Christopher Maher, chief executive officer of OceanFirst Bank, described the CDS execution as a cost-effective approach to risk reduction and capital management for the bank.
Significant risk transfer transactions — long established in European banking — have been gaining traction among U.S. banks as a tool for managing regulatory capital requirements without issuing equity. By structuring the transaction through a rated fund vehicle, 400CM says it has validated a new template that could expand access to SRT solutions for a broader set of U.S. financial institutions.
400CM manages approximately $7.5 billion for global institutional investors as of June 1, 2026.
