As discussed in a previous post, Section 4003 of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, authorizes $500 billion of liquidity to support businesses, states and municipalities “related to losses incurred as a result of coronavirus.” It can be expected that a portion of the liquidity authorized by Section 4003 of the CARES Act will take the form of loans to companies that are borrowers under loans held by collateralized loan obligation vehicles (“CLOs”). This, in turn, could ease the impact of the COVID-19 crisis on CLOs, possibly also leading to renewed CLO formation, which plays an important role in the U.S. economy by providing a source of stable funding to U.S. businesses. In this Legal Update we focus on highlighting certain notable features of Section 4003 (as well as related parts of Title IV) of the CARES Act in respect of CLOs.
