European CLOs Constrained by Regulation

Iyer-Ahrestani, Savita
February 2011
High Yield Report;2/7/2011, Vol. 22 Issue 6, p20
The article focuses on a new rule in Europe-Article 122a of the Capital Requirements Directive and its implication for loan market participants. The new rule requires originators, sponsors or original lenders in an arbitrage collateralized loan obligation (CLO) to retain at least five percent of the vehicle's equity on their balance sheet. It points out that the rule will make creating CLO more expensive and risky than in previous years. According to Shawn Cooper of Deutsche Bank, they are trying to determine how to work within the regulatory guidelines.


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