Market pushes back on STS lobby proposals for CLOs

By Tom Brown
04 Nov 2020

The Alternative Credit Council (ACC) has recommended allowing CLOs to obtain a ‘simple, transparent and standardised’ (STS) certification to increase the flow of funding to European borrowers. Investors have pushed back on such proposals, however, citing the heavy due diligence needed to invest in STS deals.

Unlike most securitizations, CLOs are actively managed, which usually involves swapping leveraged loans in and out of the securitization vehicle in order to maintain credit quality and maximise returns.

When the new regulatory regime was set up after the financial crisis, CLOs were disqualified from the STS framework. ...

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