Immediate manager tiering in store as risk retention hits CLOs

SEC
By Will Caiger-Smith
23 Oct 2014

Recent spread volatility in the US CLO market calmed down this week, with several deals pricing back around the 150bp mark over Libor. Issuance is expected to continue to increase as managers try to lock in assets under management before risk retention rules come into effect in late 2016 — but the rules could force smaller managers out of business and cause serious legal headaches for those that remain.

The rules, part of Dodd-Frank, were finalised this week. They require CLO managers to retain a 5% stake — either a vertical slice of all tranches or a horizontal equity slice — of all new issues. A separate provision was ...

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