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Risk Retention Realized – Potential Solutions for CLO Market Participants

By John Timperio, Sean Solis, Cindy Williams & Daniel Colaizzi on August 11, 2015
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93850823-1In anticipation of the effective date of the Final Rule on December 24, 2016 (early Christmas gift?), CLO market participants have been constructing solutions that allow collateral managers to raise the capital necessary to support investments required by the Final Rule.

We have seen an increased use of a hybrid structure that has been referred to as the capitalized majority-owned affiliate (C-MOA) which may be structured to comply with EU and U.S. risk retention requirements.

What is a C-MOA?

The C-MOA hybrid draws from the CMV and MOA options, yet solves some of the perceived challenges presented in both structures. Attorneys at Dechert have devised two C-MOA structures – one where the C-MOA both originates loans to be sold to the CLO and manages the CLO and a second  where the C-MOA originates loans to be sold to the CLO but the CLO is managed by the existing collateral manager.

For more information regarding these C-MOA structures, please click here to read a recently published Dechert OnPoint. To receive future publications, please click here to add your name to the list.

More from Dechert

Capital Manager Vehicles Demystified

EBA and BOE Weigh in on EU Risk Retention

U.S. Risk Retention Final Rule: Capitalized Manager Vehicles, Majority Owned Affiliates and Other FAQs

Final Credit Risk Retention Rules Adopted for Asset Backed Securities and Residential Mortgage Backed Securities

U.S. Risk Retention Final Rule: Playing it Forward for CLOs

Risk Retention – How I Learned to Love Risk Retention and Live with it. (Apologies to Stanley Kubrick)

CRE Securitization: Rehabilitation Still In Progress

Photo credit: Chance Agrella / Hemera / Thinkstock
Photo of Sean Solis Sean Solis

Sean M. Solis advises financial institutions, real estate funds, hedge funds, underwriters, issuers, institutional investors, asset managers and sponsors in structured finance transactions and other complex financings, often in a cross-border context, as well as in connection with derivatives and distressed loan trades.

Sean M. Solis advises financial institutions, real estate funds, hedge funds, underwriters, issuers, institutional investors, asset managers and sponsors in structured finance transactions and other complex financings, often in a cross-border context, as well as in connection with derivatives and distressed loan trades. He has experience in structured products (including collateralized debt obligations and collateralized loan obligations), credit facilities, asset finance, tax structured transactions, restructurings and acquisition finance.

Prior to joining Dechert, Mr. Solis worked at a boutique hedge fund and a large international law firm.

Read more about Sean SolisEmail
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  • Posted in:
    Corporate & Commercial, Financial, Real Estate & Construction
  • Blog:
    Crunched Credit
  • Organization:
    Dechert LLP
  • Article: View Original Source

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