The CLOser | The Maples group’s industry newsletter for the global CLO market JULY 2015 1 Data in this publication is derived from a variety of sources, including MaplesFS Limited, Structured Credit Investor, Leveraged Loan, CreditFlux, Moody's, S&P, Fitch, Irish Stock Exchange and Central Bank of Ireland. The CLOser | July 2015 2 Your Maples Global CLO Team provides Cayman Islands and Irish legal advice and CLO issuer/co-issuer and fiduciary services in the Cayman Islands, Delaware, Ireland and the Netherlands. This edition of The CLOser1 includes: • Maples' Offering in the Netherlands • H1 2015 US CLO Market Review and H2 Predictions • H1 2015 European CLO Market Review and H2 Predictions • CLO - Irish SPV Conversion Requirements • Irish Listings Update • FATCA Fast-Forward Appendix 1: H1 2015 US CLO Deal List Appendix 2: H1 2015 European CLO Deal List Appendix 3: CLO - Irish SPV Conversion Requirements Netherlands Office Completes Global CLO Offering Responding to strong client demand, Maples Fiduciary opened a full-service office in the Netherlands in July 2015 – completing the Maples group's European CLO service offering and reinforcing its commitment to providing comprehensive legal and fiduciary services to the global CLO market. The Maples group is renowned internationally for responsive and client-driven service and is continually reshaping its service lines to address the changing demands of the industry. Recent consolidation in the Netherlands' fiduciary market and, in turn, increasingly limited choice of premier service providers on the ground, saw Maples group clients looking for a Maples Fiduciary service offering in the jurisdiction. "European CLOs have traditionally been issued through Netherlands vehicles as the Dutch financial sector is favourably positioned in Europe due to its modern legislation and stable business climate," said Tom Davies, Regional Head of Fiduciary – Europe. "As the European CLO market continues to strengthen, the addition of a Netherlands office allows Maples Fiduciary to offer its clients a full-service CLO solution across multiple jurisdictions, whether such needs are in the Cayman Islands, Delaware, Dubai, Ireland, Luxembourg, the Netherlands or Singapore." Jan Hendrik Siemssen, Senior Vice President, is leading the Netherlands office. With a career spanning over 25 years in the Netherlands, he has extensive experience in fiduciary services. Previously, he has held senior positions at a number of large Netherlands based trust companies where he had responsibility for various operational and product divisions covering structured finance, securities lending, risk management and corporate trust. "Our Netherlands office will be full-service through the lifecycle of a CLO – from entity formation to directors and administration on both the CLO issuers and the Stichting holding foundations," said Siemssen. "We are delighted and excited to be able to provide Netherlands fiduciary services at a time when we are seeing renewed activity in the CLO market and are already working with a number of Maples group clients on their Netherlands structures." Scott Somerville, MaplesFS' Chief Executive Officer added, "We are proud to continue our evolution as a leading provider of services to the global CLO market through our expansion in the Netherlands. It is also exciting to welcome someone of the calibre of Jan Hendrik to Maples Fiduciary. His relationships and experience in the Netherlands and continental Europe will be invaluable as we continue to strengthen our offering in the region." For further details, please contact: Jan Hendrik Siemssen +31 20 808 1081 [email protected] 6,000 structured finance vehicles administered 13 Global Offices 58% CLO market share 15 specialist CLO lawyers 20 specialist CLO fiduciary professionals US CLO Market H1 2015 US CLO Market Review Issuance levels in H1 2015 have largely been on par with H1 2014 despite a scarcity of primary loan collateral and the US CLO market grappling with risk retention. In fact, in terms of new issue US CLOs, the 112 deals chalked up in the first six months of 2015 only fall two deals shy of the equivalent period in 2014.2 Furthermore, the issuance level in dollar terms is only US$2bn behind the US$61bn reached at this point in 2014, despite there being far fewer jumbo deals so far this year. The largest priced deal to 30 June 2015 in the US market was NZCG Funding 2 (Guggenheim) at US$856.75m, which was only the third deal in H1 2015 to exceed US$800m. Contrast this with the equivalent period in 2014 where two deals had already exceeded US$1bn and a further six deals were greater than US$800m. That may all change, however, as ALM XVI (Apollo) is slated to price in early H2 2015 with expected pricing in excess of US$1bn. 2015 started slowly with no deals pricing in the first half of January and only US$5.15bn of total issuance from nine deals for that month. That was still significantly ahead of the same period for 2014, which only saw US$2.55bn of total issuance. The slow start in 2015 was generally attributable to lower equity demand, concerns over oil prices and the pre-Christmas push to price many of the deals that were then in the 2014 pipeline. Issuance levels rebounded significantly in March, however, with a record US$16bn plus of US CLO issuance. June saw 25 CLOs priced, accounting for nearly US$13bn of issuance and making it the second most active month of the year to date. Globally to date there has been over US$68bn of issuance. US CLO numbers alone account for just under US$60bn. Refinancings Refinancing activity in the first half of 2015 almost outpaced the total 2014 level, with 20 deals recorded for H1 against 21 for all of last year. This massive increase in large part reflects the fact that primary CLO issuance rose significantly in 2012 and 2013 after the re-emergence of the US CLO market in 2010 and 2011, and the fact that many of these deals have exited or are now exiting their non-call periods and are suitable for refinancing. In H1 2015, 112 new US CLOs were priced by 77 different US managers across 108 Cayman Islands issuers, three Delaware issuers and one Irish issuer. Notwithstanding risk retention headwinds, three new US CLO managers entered the market in H1 2015, being Fifth Street, Z Capital Credit Partners and Doubleline, and each of Carlyle, CIFC, Golub, GSO, Guggenheim and Och-Ziff priced three or more CLOs during that period. Furthermore, five banks arranged 10 or more CLOs each in H1 2015, with Citigroup once again leading the pack followed by Morgan Stanley and JPMorgan. Pricing tightened in Q2 2015 with Magnetite XIV achieving AAA spreads of 139bps over LIBOR but by the end of H1 spreads The CLOser | July 2015 7/14 8/14 9/14 10/14 11/14 12/14 1/15 2/15 3/15 4/15 5/15 6/15 $20B $15B $10B $5B $0B - 40 - 30 - 20 - 10 - 35 - 25 - 15 - 5 - 0 US CLO Activity - Monthly Source: S&P Capital IQ LCD Volume ($B) $150B $120B $90B $60B $30B $0B 2011 2012 2013 2014 YTD 2014 YTD 2015 US CLO Activity - Annual Source: S&P Capital IQ LCD 5 2 Data derived from LCD. Count Volume ($B) Count - 50 - 100 - 0 - 150 - 200 - 250 The CLOser | July 2015 were back around the mid-140bps level with top tier managers coming in slightly tighter. In contrast, the year started with much higher spreads in the 155-160bps range. For a complete list of the H1 2015 priced US CLOs see Appendix 1. Risk Retention We have seen such a multitude of approaches taken to risk retention structuring that it is impossible to single out any one model or structure that predominates. The phrase echoed in the CLO conference halls, 'there is no one size that fits all', is apposite. Originator structures on the European side still prove a popular means for CRR compliance and, despite uncertainty from European regulators, are still a favoured approach (see pages 7-9 for a full review of risk retention in Europe). Although US risk retention does not come into effect until 24 December 2016, many US managers have complied with the US regulations early, in part to appease nervous investors and in part because they could, by simply taking the 5% retention piece, using both vertical and horizontal approaches. In addition, many US managers have issued CRR compliant US CLOs in order to attract EU investors who have lined up to invest given better returns than on European CLOs. A number of deals have also closed using the "CMV" (capitalised manager vehicle) and "MOA" (manager owned affiliate) structures. Such acronyms and the related structures are now so well known to the CLO market that they no longer need further explanation. It is probably fair to say, however, that no truly efficient 'holy grail' risk retention structure using only one vehicle to accommodate both US and European CLOs has yet emerged. Notwithstanding, market participants continue to search diligently. Any such structure needs careful tax and accounting analysis across multiple jurisdictions to ensure that there are no adverse tax or accounting consequences for the manager, the deal or its investors. This very much becomes an issue, for example, when trying to structure an efficient vehicle that combines both US and European cash flows. Back in March 2015 a large percentage of US CLOs included 'delayed draw' or 'future funded' notes. The addition of this feature was designed to enable a refinancing of these deals after the risk retention rules come into effect but without there being any 'new issuance' of notes which would trigger risk retention obligations. By June 2015, however, only about 10% of US deals continued to include this feature. Instead, most managers priced their deals with longer non-call/reinvestment periods and, during a small window between late 2014 and early 2015, some deals incorporated a shortened reinvestment period to enable a refinancing before the 24 December 2016 deadline. US CLOs – What's in store for H2 2015? Whilst market participants predict a slowdown in issuance in Q3 2015, for the most part, predictions for total issuance volume for 2015 have been revised upwards. At the start of the year, the range most commonly given was US$70bn to US$90bn across approximately 140 to 180 transactions.3 JPMorgan and Morgan Stanley are now predicting in excess of US$100bn of issuance after better than expected performance in H1 2015. A number of very large primary loan issuances are also expected in the US in H2 2015 which many pundits anticipate should alleviate, at least in part, the collateral shortage facing the CLO market. Continued concerns over Greece, however, coupled with summer holidays, are expected to bring a 'wait and see' approach to new issuance, although that may be more of a factor for the European CLO market than in the US where issuance levels continue to remain strong and the pipeline for new deals remains robust. In terms of the outlook for the second half of 2015, we expect to see a continued evolution in risk retention structures as managers come to grips with the regulatory requirements on both sides of the Atlantic and position themselves for strong business through 2016 and beyond. With a healthy pipeline of over 63 deals, with manager clients looking to repeat or increase their 2014 issuance levels and with new managers, arrangers and investors continuing to enter the CLO space, we expect excellent 2015 issuance levels which, whilst not reaching the high water market of 2014, should, we believe, comfortably exceed US$100bn. For further details, please contact: Mark Matthews +1 345 814 5314 [email protected] Nicola Bashforth +1 345 814 5213 [email protected] 6 3 JPMorgan / Wells / Morgan Stanley / BAML. What's happening in Europe? 2015 – The story so far The CLOser | July 2015 Q2 2015 was the strongest quarter for European CLO transactions since Q4 2007, reflecting increased investor confidence in the European market. Overall, the CLO market in Europe had a strong H1 2015 with €7.56bn worth of issuance from 19 deals. Contrast this with €6.92bn from 16 deals during the same period in 2014. 4 The largest priced deal for the period was KKR's Avoca CLO XIV at €516.1m, which was the only deal in H1 to exceed €500m. Ireland proved once again to be the issuer jurisdiction of choice for European CLOs, with 11 of the 19 transactions in H1 2015 using Irish SPVs as the CLO issuer. So far this year, the European CLO market continues to show strength in depth with issuances in H1 2015 being completed by 11 different arrangers and 15 different managers. There were also a number of new entrants to the European CLO market in H1 2015, with Oak Hill Advisors, Partners Group and BNP Paribas Asset Management issuing debut deals, while Sterne, Agee & Leach arranged their first CLO. In addition, H1 2015 also saw the return of several managers who had not been active in the European CLO market in 2014, including PineBridge Investments and Credit Suisse Asset Management. A new feature emerged in H1 2015 with a number of managers inserting a floor on interest rates for the senior notes in their CLOs, ranging from 1.2% to 1.35%. Whilst such a feature was unseen in 2014, interest floors are fast becoming the norm in 2015 as investors seek to safeguard their returns. Risk Retention In our February 2015 edition of The CLOser we described some common structures that we have seen utilised to ensure both (a) compliance with the European risk retention rules as contained in the Capital Requirements Regulation5 ("CRR") and (b) the economic viability of such transactions for both investors and managers alike. In this edition, we provide some further commentary on these structures and an analysis of recent observations made by regulators on their efficacy. Under the CRR, the retention requirement can be satisfied by the 'sponsor' or 'originator' of the transaction or the 'original lender'. Manager Retention Holders The definition of 'sponsor' includes 'credit institutions' and 'investment firms' holding specific authorisations under Directive 2004/39/EC ("MiFID"). Given this, many European managers have obtained the necessary MiFID authorisation in order to enable them to act as sponsor on their CLOs, retaining the necessary retention piece to make their deals risk retention compliant. This approach will not work for US managers, however, as the MiFID authorisation requires a European based manager entity. In addition, the pool of managers that can act as sponsor is further limited by the fact that alternative investment fund managers authorised under AIFMD6 cannot hold a dual authorisation under MiFID and are therefore unable to qualify as 'sponsors'. As a consequence, with the ongoing growth of the European CLO market, we have seen a number of US managers address this issue by setting up MiFID authorised affiliates in Europe, in order to act as the sponsor for new European CLO transactions. Whilst this approach certainly works for the larger managers that have sufficient capital to satisfy the risk retention requirements for their European CLO transactions, this is not a panacea for the 7 4 Data derived from LCD. 5 Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012. 6 Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010. The CLOser | July 2015 smaller managers looking to enter the CLO space in Europe. Even for managers that can procure sufficient capital to act as the sponsor for CLO transactions, balance sheet size and the cost of funding retention interests will ultimately constrain the number of transactions that they can sponsor at any given time. Certain managers have sought to overcome the cost of funding issue by selling the risk retention piece of the CLO to a third party but, in doing so, they are still required to retain the credit risk thereon to ensure compliance with the CRR retention requirements. Originator Retention Most CLOs acquire assets in the secondary market and not from the balance sheet of an originating selling institution. As a result, such CLOs do not have an entity which easily meets the definition of originator or original lender for purposes of CRR compliance. This definitional mismatch led to calls for managed CLOs to be excluded from the scope of the CRR risk retention rules on the basis that they do not constitute originator 'bank' securitisations. It is important to note that the definition of 'originator' includes an entity which "purchases a third party's exposures for its own account and then securitises them". For non-EU managers lacking the regulatory authorisations to act as 'sponsor' for the purposes of the CRR, it remains possible to satisfy the retention requirement as an 'originator' by acquiring loans from third parties, holding or 'seasoning' them for a period of time, and then selling them on to the CLO issuer either during warehousing or at the close of the CLO. Such entities qualify as an 'originator' for the purposes of the CRR and are then required to hold the risk retention piece for the duration of the CLO transaction. In the absence of guidance from regulators, there has been much debate among CLO market participants in relation to the necessary attributes of a compliant 'originator' structure. Varying approaches have been seen in terms of what constitutes an originator purchasing exposures for its 'own account', particularly in terms of the length of time an originator is required to hold or 'season' loans before selling them to the CLO issuer and the attributes necessary for such originator entity to have the requisite 'economic substance' required by the regulators. The use of such originator structures has drawn scrutiny from regulators such as the European Banking Authority ("EBA"). In its report on the CRR risk retention rules published in December 2014,7 the EBA expressed concern that the wide scope of the 'originator' definition facilitated structures that complied with the letter but not the spirit of the rules and recommended that the definition of 'originator' be reassessed and narrowed to prevent abuse and to ensure that the 'originator' is of real substance and holds actual economic capital on its assets for a minimum period of time. The report does not include specific guidance around timeframes for originators holding exposures or what may be required in terms of substance, although specific reference is made to the interests of originator entities that are funded by third party investors not always being aligned with the interests of investors. It therefore appears that a distinction is being drawn between third party funded originator structures and those which are funded and owned by a party whose interests are aligned with investors, such as the CLO manager. Any new guidance or rules that emerge from the EBA recommendations are likely to focus on third party funded originator structures. The Bank of England ("BOE") and the European Central Bank (the "ECB") recently published a joint response8 addressing, among other things, the EBA's report which broadly concurred with the EBA's view on the definition of originator. The BOE and ECB report does state that further consideration should be given to the party best placed to hold the risk retention in non-bank securitisations (such as managed CLOs), which suggests that they have given thought to the difficulty there is in structuring CLO transactions to comply with risk retention rules which were drafted for bank securitisations. In June 2015 a proposed amendment to the European Parliament resolution on the Capital Markets Union was tabled, which sought to increase the risk retention requirement to 10-15% for certain originators of high quality securitisations, and was rejected. This provided comfort to the market and confirmed that the 5% risk retention requirement is not on the table as far as regulators are concerned. However, from a CLO perspective, it is questionable as to what impact such a change would have had given that CLO transactions are not anticipated to fall within the scope of 'high quality securitisations'. 8 7 http://www.eba.europa.eu/documents/10180/534414/Securitisation+Risk+Retention+Report.pdf 8 https://www.ecb.europa.eu/pub/pdf/other/ecb-boe_response_ec_consultation_on_securitisation20150327.en.pdf The CLOser | July 2015 In conclusion, most 'originator entity' structures that have been brought to market have already included measures imposing economic substance requirements and requirements that originator entities must season loans for prescribed minimum time periods, which would appear to comply with both the letter and the spirit of the CRR. It remains to be seen what, if any, action will be taken by the European Commission in respect of the definition of 'originator' in light of the calls for change from the EBA, BOE and ECB. Where do we go from here? At the start of the year many market participants predicted that 2015 would at least match the market performance in 2014, if not exceed it. Whilst the continuing uncertainty surrounding Greece's debt problems threatens to affect planned issuances for the remainder of the summer, sentiment is positive and it remains to be seen how the financial turmoil in Greece will in fact affect the European CLO market. Notwithstanding the Greek uncertainty, interest in the European CLO market from US CLO managers continues which, in part, may be driven by the ongoing concern in the US regarding loan origination volumes (where issuance levels are down 50% from the equivalent period in 2014) but, more likely, reflects a longer term positive view of the European CLO market. A number of large US managers such as Highbridge Principal Strategies, Hermes Investment Management, Och-Ziff and Onex Credit Partners have made strategic hires this year with a view to establishing their European CLO operations. This combined with a continuing strong pipeline of transactions indicates that confidence in the European CLO product remains strong. For a complete list of the H1 2015 priced European CLOs see Appendix 2. For further details, please contact: Nollaig Murphy +353 1 619 2079 [email protected] Stephen McLoughlin +353 1 619 2736 [email protected] 9 10 CLO - Irish SPV Conversion Requirements The CLOser | July 2015 The Irish Companies Act 2014 (the "Act") came into effect on 1 June 2015. The Act replaces all pre-existing Irish companies' statutes in what is largely a consolidation, simplification and codification exercise. However, there are a number of provisions which will impact new CLO transactions and require steps to be taken for Irish issuers of existing CLOs. The Act creates a new type of private company limited by shares called a designated activity company (or "DAC") and changes the form of a private company limited by shares (an "LTD"). The primary difference between a DAC and an LTD under the Act is that an LTD is not able to issue listed debt securities. Therefore, all issuers incorporated after 1 June 2015 will need to be incorporated as DACs and all CLO issuers incorporated prior to 1 June 2015 will need to convert to DACs. There is a generous transition period (effectively 15 months), which runs from 1 June 2015, but if a CLO issuer does not convert by the end of the transition period, it will be illegal for it to continue to have its debt securities listed. CLO issuers who are public limited companies are not required to take any action as a result of the commencement of the Act. We have set out in Appendix 3 a checklist of issues which will help any CLO issuer navigate the conversion process. We would be very happy to provide any assistance that may be required in connection with any conversions. For further details, please contact: Nollaig Murphy +353 1 619 2079 [email protected] Stephen McLoughlin +353 1 619 2736 [email protected] Irish Listings Update During H1 2015, 142 CLOs (US and European), comprising both new issuances and refinancings, were listed on the Irish Stock Exchange ("ISE"). Of those 142 listings, 113 were by Cayman Islands issuers, accounting for 80% of CLO listings. Maples and Calder's Dublin office listed 49% of all ISE listed CLOs and 56% of all Cayman Islands issuers listing on the ISE. Of the 20 issuers that had European domiciles, 13 were Irish and seven were Dutch. There were eight issuers from Delaware and one from the British Virgin Islands. Over the period in review 85% of the CLOs opted to list on the Global Exchange Market rather than on the Main Securities Market. In the case of Cayman Islands issuers, this increased to 94% opting to list on the Global Exchange Market. For further details, please contact: Ciaran Cotter Head of Debt Listing Ireland +353 1 619 2033 [email protected] The CLOser | July 2015 11 FATCA Fast-Forward: The OECD Common Reporting Standard The CLOser | July 2015 The Organisation for Economic Co-operation and Development ("OECD") released a model Competent Authority Agreement and Common Reporting Standard ("CRS") on 13 February 2014 to create a global standard for the automatic exchange of financial account information. While the introduction of the CRS represents another compliance burden for financial institutions such as CLOs, it is closely modelled on the FATCA regime, which should permit recently introduced FATCA procedures to be utilised. Increased Scope: The CRS is more closely aligned to UK FATCA than US FATCA in terms of account due diligence and related reporting requirements and, similar to UK FATCA, there is no underlying withholding tax regime. In addition, CRS differs from US FATCA in a number of other ways that will likely increase the number of reportable accounts and change the classification of certain investors. For example, CRS does not provide a de minimis threshold for individuals and classification is based on tax residency rather than nationality or citizenship. Early Adopters: The Cayman Islands and Ireland are among a group of over 40 jurisdictions known as the 'Early Adopters Group' that have committed to the implementation of the CRS by the end of 2015. On 16 June 2015, the Cayman Islands government notified industry that specific regulations would be issued in October 2015 in relation to implementing the CRS in the Cayman Islands. Ireland is also expected to pass relevant regulations later this year. The United States has, so far, not joined the CRS initiative given the extensive network of intergovernmental agreements it has already signed up. Timeline: Cayman and Irish CLOs will need to implement due diligence procedures from 1 January 2016 to determine the tax residency of all account holders. Pre-existing accounts will be those maintained on 31 December 2015 and new accounts would be those opened from 1 January 2016. The first reporting date deadline to the Cayman Islands Tax Information Authority in respect of CRS is expected to be 31 May 2017. For further details, please contact: Scott Macdonald +1 345 814 5317 [email protected] 12 Your Global CLO Team - a CLOser Look We are including a short and informative bio for two members of our global CLO team so you can get to know our CLO team a little better. In this edition we introduce you to John Dykstra from Maples and Calder and Betsy Mortel from Maples Fiduciary in the Cayman Islands. I joined the Cayman Islands office of Maples and Calder in 2001. Since that time, my practice has been focused on CLOs and other structured finance products. In my early days with the firm, I worked on the very first CLO transactions of several different managers. I have had the opportunity to be involved in the evolution of the CLO market over those years; in particular, through the financial crisis when many improvements were made to the product. I began my legal career in Canada 20 years ago, practising in Toronto for three years with a top tier Canadian firm with a focus on M&A and securities law. I then joined Clifford Chance in London, where I practised for three years in the areas of debt capital markets and equity derivatives. While there, I was seconded to Lehman Brothers for several months to provide legal support to their fixed income desk. I haven't looked back since moving to the Cayman Islands. It's a fantastic place to live. I've long been an avid runner and the great weather in the Cayman Islands allows me to keep up the outdoor runs throughout the year. Having grown up with bitterly cold Canadian winters, I very much enjoy the shorts and t-shirt weather of a Cayman Islands winter! John Dykstra Partner, Maples and Calder +1 345 814 5530 [email protected] I joined MaplesFS in August 2009 to serve as independent director to companies in investment funds and structured finance, including CLO issuers. For the past three years, I've focused on providing directorship and administrative services to newly incorporated CLO issuers. Through my role as independent director, I have worked with clients (particularly law firms and managers) on new deals which have kept me up to date with the regulatory changes affecting the CLO industry, one of which is the Volcker Rule. Prior to joining MaplesFS, I was a manager in the assurance and advisory services of Deloitte & Touche, Cayman Islands, specialising in the financial services industry with a focus on alternative investments. I am a Certified Public Accountant with a Bachelor of Science degree in Accountancy. I hail from the Philippines and enjoy the island life that Cayman has to offer, including sea views on my way to work, relaxing on the beach on the weekends and travelling to nearby islands during holidays. During my free time, I am either working hard in the gym doing CrossFit, running outdoors or practising yoga. Betsy Mortel Senior Vice President, Maples Fiduciary +1 345 814 5834 [email protected] The CLOser | July 2015 13 The CLOser | July 2015 Forthcoming Events Members of the Maples and Calder and MaplesFS global CLO team we will be attending the following industry events during H2 2015: ABS East 2015 16-18 September 2015 Fontainebleau, Miami Beach, FL TSI Congress 2015 22-24 September 2015 Radisson Blu Hotel, Berlin, Germany Euromoney Seminars – 3rd Annual European CLO Congress 28-29 September 2015 London Marriott Hotel Grosvenor Square, London, UK Creditflux CLO Investor Summit 2015 6 October 2015 Pier Sixty, New York, NY Opal Financial Group – 2nd Annual European CLO Summit 14-16 October 2015 Fairmont Monte Carlo, Monaco CLO Summit – Opal 2-4 December 2015 The St Regis Monarch Beach, Dana Point, CA 14 Nollaig Murphy +353 1 619 2079 [email protected] Stephen McLoughlin +353 1 619 2736 [email protected] London Jonathan Caulton +44 20 7466 1612 [email protected] Alasdair Robertson +1 345 814 5345 [email protected] John Dykstra +1 345 814 5530 [email protected] Tina Meigh +1 345 814 5242 [email protected] Nicola Bashforth +1 345 814 5213 [email protected] Guy Major +1 345 814 5818 [email protected] Carrie Bunton +1 345 814 5819 [email protected] Our CLO team comprises 15 specialist CLO lawyers and 20 specialist CLO fiduciary professionals based in the Cayman Islands, Delaware, Dublin, London and the Netherlands. Throughout our considerable longevity in this space, we have provided our clients with the benefit of our unparalleled depth of knowledge, experience and insight into what we see across the whole structured finance market, from the latest warehousing structures, to the latest regulatory developments and how they impact CLOs, to ongoing post-closing CLO issues. For further information, please speak with your usual Maples and Calder or MaplesFS contact, or the following primary CLO contacts: July 2015 © MAPLES AND CALDER This update is intended to provide only general information for clients and professional contacts of Maples and Calder and MaplesFS. It does not purport to be comprehensive or to render legal advice. Cayman Islands Cayman Islands MaplesFS Maples and Calder Mark Matthews +1 345 814 5314 [email protected] Scott Macdonald +1 345 814 5317 [email protected] Jonathon Meloy +1 345 814 5412 [email protected] Dublin The CLOser | July 2015 15 Andrew Dean +1 345 814 5710 [email protected] Christopher Watler +1 345 814 5845 [email protected] Netherlands Jan Hendrik Siemssen +31 20 808 1081 [email protected] Delaware Edward L. Truitt Jr. +1 302 338 9129 [email protected] Scott A. Huff +1 302 338 9127 [email protected] Dublin Stephen O’Donnell +353 1 697 3244 [email protected] US CLO Pricing Q2 30/06/15 30/06/15 30/06/15 30/06/15 30/06/15 30/06/15 30/06/15 26/06/15 23/06/15 23/06/15 22/06/15 18/06/15 15/06/15 16/06/15 15/06/15 15/06/15 06/11/15 06/11/15 06/11/15 06/10/15 06/10/15 06/10/15 06/09/15 06/09/15 06/09/15 06/04/15 06/04/15 06/04/15 06/03/15 06/03/15 06/02/15 29/05/15 21/05/15 20/05/15 20/05/15 19/05/15 18/05/15 15/05/15 15/05/15 15/05/15 13/05/15 13/05/15 05/08/15 05/08/15 05/07/15 05/07/15 05/06/15 05/05/15 05/05/15 05/01/15 05/01/15 05/01/15 29/04/15 28/04/15 24/04/15 23/04/15 23/04/15 22/04/15 22/04/15 22/04/15 17/04/15 16/04/15 15/04/15 14/04/15 13/04/15 04/10/15 04/10/15 04/10/15 04/09/15 04/09/15 04/08/15 04/08/15 04/02/15 04/01/15 04/01/15 04/01/15 Benefit Street Partners CLO VII LCM XIX Carlyle Global Market Strategies CLO 2015-3 IVY Hill Middle Market Credit Fund X Jamestown CLO VII OZLM XIII Hildene CLO IV Jefferson Mill CLO CIFC Funding 2015-III Voya CLO 2015-2 Palmer Square CLO 2015-2 Sound Point CLO 2015-2 Marathon CLO VIII Neuberger Berman CLO XIX Octagon Investment Partners XXIII Parallel 2015-1 Cathedral Lake II ICG US CLO 2015-1 Magnetite VI (refinancing) Wind River 2015-1 Marine Park CLO (refinancing) ALM VI (refinancing) Fraser Sullivan CLO VII (refinancing) Babson CLO 2012-II (refinancing) Fortress Credit Investments CLO 2015-4 Venture XXI OCP CLO 2015-9 Carlyle GMS Finance MM CLO 2015-1 Z Capital Credit Partners CLO 2015-1 Halcyon Loan Advisors 2015-2 GoldenTree Loan Opportunities X CIFC Funding 2012-2 (refinancing) Doral CLO II (refinancing) BlueMountain CLO 2015-2 Magnetite XIV Galaxy XX CLO Golub Capital Partners CLO 23(B) Ares XXIV CLO (refinancing) Fortress Credit Funding V (refinancing) Fortress Credit Funding V (refinancing) Apidos CLO XXI Mountain View CLO IX Garrison Funding 2015-1 Madison Park Funding IX (refinancing) Anchorage Credit Funding 2015-1 Trinitas CLO III Avery Point VI CLO FS Senior Funding LCM XII (refinancing) Allegro CLO III Cutwater 2015-1 Monroe Capital BSL CLO 2015-1 Dryden Senior Loan Fund XXIV (refinancing) Madison Park Funding XVII OZLM XII NXT Capital CLO 2015-1 Venture XI CLO (refinancing) CIFC Funding 2015-II KVK CLO 2015-1 TICP CLO IV Stewart Park CLO Jackson Mill CLO ACAS CLO 2015-1 Octagon Investment Partners 24 Apollo Credit Funding IV AMMC CLO XVI KKR CLO 11 OCP CLO 2015-8 JFIN Revolver CLO 2015-II Palmer Square CLO 2015-1 Symphony CLO X (refinancing) Zais CLO 3 Carlyle Global Market Strategies CLO 2012-1 (refinancing) Babson CLO 2015-1 Carlyle Global Market Strategies CLO 2015-2 Catamaran CLO 2015-1 JPMorgan Morgan Stanley JPMorgan Citigroup Credit Suisse Citigroup Citigroup BAML BNP Paribas Morgan Stanley Citigroup BAML JPMorgan BNP Paribas Wells Fargo Morgan Stanley Jefferies Credit Suisse Credit Suisse Credit Suisse Morgan Stanley Credit Suisse Citigroup Citigroup BAML Credit Suisse Citigroup Citigroup Jefferies Wells Fargo Morgan Stanley Morgan Stanley Nomura JPMorgan Deutsche Bank Goldman Sachs Wells Fargo Morgan Stanley Natixis Natixis JPMorgan Citigroup JPMorgan Credit Suisse Greensledge Nomura Morgan Stanley Natixis BNP Paribas Morgan Stanley RBC BNP Paribas Morgan Stanley Wells Fargo JPMorgan Wells Fargo, BMO Citigroup BCG Goldman Sachs Morgan Stanley Wells Fargo Credit Suisse Deutsche Bank Citigroup Mizuho Jefferies Credit Suisse BAML Jefferies JPMorgan Citigroup Credit Suisse Morgan Stanley JPMorgan Citigroup BCG, Greensledge Benefit Street Partners LCM Asset Management Carlyle Investment Management IVY Hill Asset Management 3i Debt Management Och-Ziff Loan Management Hildene Leveraged Credit Shenkman Capital Management CIFC Asset Management Voya Alternative Asset Management Palmer Square Capital Management Sound Point Capital Management Marathon Asset Management Neuberger Berman Octagon Credit Investors Doubleline Capital Carlson Capital Intermediate Capital Group Blackrock THL Credit Advisors GSO/Blackstone Apollo 3i Debt Management Babson Fortress MJX Asset Management Onex Credit Partners Carlyle GMS Investment Management Z Capital Credit Partners Halcyon GoldenTree Asset Management CIFC Asset Management Triumph Capital Advisors BlueMountain Capital Management BlackRock PineBridge Investments Golub Capital Ares Management Fortress Fortress CVC Credit Partners Seix Advisors Garrison Investment Group Credit Suisse Asset Management Anchorage Capital Management Triumph Capital Advisors Sankaty Advisors Fifth Street Senior Floating Rate Corp LCM Asset Management AXA Investment Managers Cutwater Asset Management Monroe Capital Prudential Investment Management Credit Suisse Asset Management Och-Ziff Loan Management NXT Capital MJX Asset Management CIFC Asset Management Kramer Van Kirk Credit Strategies TPG GSO/Blackstone Shenkman Capital Management American Capital Octagon Credit Investors Apollo American Money Management Corp KKR Onex Credit Partners Jefferies Palmer Square Capital Management Symphony Asset Management ZAIS Group Carlyle Investment Management Babson Carlyle Investment Management Trimaran Advisors DATE ISSUER ARRANGER MANAGER APPENDIX 1 US CLO Pricing Q1 31/03/15 30/03/15 27/03/15 27/03/15 27/03/15 26/03/15 25/03/15 25/03/15 25/03/15 24/03/15 24/03/15 20/03/15 19/03/15 19/03/15 19/03/15 18/03/15 17/03/15 17/03/15 17/03/15 16/03/15 13/03/15 03/11/15 03/11/15 03/10/15 03/06/15 03/06/15 03/05/15 03/05/15 03/04/15 03/03/15 03/03/15 03/03/15 27/02/15 27/02/15 27/02/15 25/02/15 25/02/15 20/02/15 20/02/15 20/02/15 13/02/15 13/02/15 13/02/15 02/06/15 02/06/15 02/06/15 02/05/15 02/05/15 02/05/15 02/03/15 30/01/15 30/01/15 29/01/15 29/01/15 28/01/15 28/01/15 26/01/15 22/01/15 15/01/15 01/09/15 Golub Capital Partners CLO 24(M) JFIN CLO 2015 Apidos CLO IX (refinancing) NZCG Funding 2 Shackleton 2015-VII CLO Kitty Hawk CLO 2015-1 Arrowpoint CLO 2015-4 Crown Point CLO III Dryden 38 Senior Loan Fund JFIN Revolver CLO 2015 Voya CLO 2012-3 (refinancing) Voya CLO 2012-2 (refinancing) CENT CLO 23 Fortress Credit Opportunities VI CLO WhiteHorse X Greywolf CLO V Canyon Capital CLO 2015-1 Halcyon Loan Advisors Funding 2015-1 Highbridge Loan Management 6-2015 Mariner CLO 2015-1 Venture XX CLO Anchorage Capital CLO 6 NewStar Commercial Loan Funding 2015-1 ECP CLO 2015-7 Benefit Street Partners CLO VI OHA Loan Funding 2015-1 Sound Point CLO VIII Treman Park CLO ACIS CLO 2015-6 BlueMountain CLO 2015-1 Steele Creek CLO 2015-1 Voya CLO 2015-1 Battalion CLO VIII GoldenTree Loan Opportunities XI Madison Park Funding XVI Betony CLO Denali Capital CLO XI CIFC Funding 2015-I LCM XVIII Oaktree EIF II series B1 Flatiron CLO 2015-1 OZLM XI Race Point IX CLO Ares XXXIII CLO Golub Capital Partners CLO 22(B) Magnetite XII Carlyle Global Market Strategies CLO 2015-1 MidOcean Credit CLO IV Vibrant CLO III Clear Creek CLO Dryden 37 Senior Loan Fund NZCG Funding Fifth Street Senior Loan Fund I Galaxy XIX CLO Dorchester Park CLO Jamestown CLO VI ALM XII CVP Cascade CLO-3 Apidos CLO XX CIFC Funding 2011-1 (refinancing) Wells Fargo BNP Paribas Credit Suisse Citigroup Credit Suisse MUFJ Deutsche Bank Natixis Morgan Stanley Jefferies Citigroup Citigroup BAML Natixis BAML Citigroup Goldman Sachs Morgan Stanley Morgan Stanley BAML JPMorgan JPMorgan Wells Fargo Citigroup Deutsche Bank JPMorgan Morgan Stanley Goldman Sachs Jefferies Citigroup BNP Paribas Credit Suisse Citigroup Greensledge BAML Morgan Stanley Natixis BNP Paribas Deutsche Bank Wells Fargo Morgan Stanley BAML Citigroup Goldman Sachs JPMorgan Wells Fargo Morgan Stanley Credit Suisse BNP Paribas Goldman Sachs JPMorgan Citigroup Wells Fargo Citigroup Deutsche Bank Citigroup Morgan Stanley Jefferies Credit Suisse Nomura Golub Capital Apex Credit Partners CVC Credit Partners Guggenheim Alcentra Guggenheim Arrowpoint Asset Management Valcour Capital Management Prudential Investment Management Jefferies Voya Alternative Asset Management Voya Alternative Asset Management Columbia Management Investment Advisors Fortress HIG WhiteHorse Capital Greywolf Capital Management Canyon Capital Partners Halcyon Highbridge Mariner Investment Group MJX Asset Management Anchorage Capital Management NewStar Financial Silvermine Capital Management Benefit Street Partners Oak Hill Advisors Sound Point Capital Management GSO/Blackstone Acis Capital Management BlueMountain Capital Management Steele Creek Investment Management Voya Alternative Asset Management Brigade Capital Management GoldenTree Asset Management Credit Suisse Asset Management Invesco Crestline Denali Capital CIFC Asset Management LCM Asset Management Oaktree Capital Management New York Life Investment Management Och-Ziff Loan Management Sankaty Advisors Ares Management Golub Capital Blackrock Carlyle Investment Management MidOcean Partners DFG Investment Advisers CreekSource Prudential Investment Management Guggenheim Fifth Street Management PineBridge Investments GSO/Blackstone 3i Debt Management Apollo Credit Management Credit Value Partners CVC Credit Partners CIFC Asset Management DATE ISSUER ARRANGER MANAGER APPENDIX 1 Data in this Appendix is derived from Structured Credit Investor and LCD. European CLO Pricing H1 26/06/15 25/06/15 06/11/15 22/05/15 21/05/15 21/05/15 15/05/15 14/05/15 13/05/15 05/06/15 30/04/15 24/04/15 04/01/15 26/03/15 25/03/15 25/03/15 20/03/15 03/06/15 03/03/15 25/02/15 25/02/15 18/02/15 13/02/15 30/01/15 Harvest CLO XII Atlantes SME No. 5 Tikehau CLO Euro-Galaxy IV CLO Cadogan Square CLO VI Cairn CLO V Avoca CLO XIV FTA PYMES Santander 11 (retained) Orwell Park CLO Penta CLO 2 Oak Hill European Credit Partners III Jubilee CLO 2015-XV CVC Cordatus Loan Fund V GLG Euro CLO I BNPP IP Euro CLO 2015-1 IM Grupo Banco Popular Empresas VI (retained) Grosvenor Place 2015-1 Pelican SME No. 2 (retained) Aurium CLO I Bosphorus CLO I Harvest CLO XI Dartry Park CLO Dryden 35 Euro CLO Carlyle Global Market Strategies Euro CLO 2015-1 BAML StormHarbour, Banif Goldman Sachs Barclays Credit Suisse Citigroup Morgan Stanley Santander BNP Paribas BAML Goldman Sachs BAML Citigroup Morgan Stanley RBS, Greensledge Banco Populare Deutsche Bank RBS Deutsche Bank Sterne Agee Natixis Citigroup Goldman Sachs Barclays 3i Debt Management Banif Tikehau Capital Europe PineBridge Investments Credit Suisse Cairn Loan Investments KKR Santander GSO Capital Partners Partners Group (UK) Management Oak Hill Advisors Alcentra CVC Credit Partners GLG Partners BNP Paribas Asset Management Banco Popular CQS Caixa Economica Montepio Geral Spire Partners Commerzbank 3i Debt Management Blackstone/GSO Pramerica CELF Advisors DATE ISSUER ARRANGER MANAGER APPENDIX 2 Data in this Appendix is derived from Structured Credit Investor and LCD. APPENDIX 3 Irish Companies Act 2014 CLO - SPV Conversion Requirements 1 Type: • DAC (issued or likely to issue listed debt securities) • LTD • PLC (conversion not required but update amendment of constitutional documents advisable) 2 Shareholders: • Orphan – who is the share trustee? • Any shareholders other than share trustee? • Are shares held by fund or its custodian/depository? 3 Declaration of Trust: • Is consent required to convert or amend constitutional documents (e.g. from notes trustee / rating agency)? 4 Transaction Documents: • Review covenants for restrictions on change of name / type / status / constitutional documents / issuer charter, etc. • Are notices required to be sent or consent required to be procured? • Who are notice / consent parties? e.g. trustee / swap counterparty / noteholders / facility agent / account banks / rating agency confirmation? • Any other conditions to be complied with, e.g. delivery of opinions to trustees (tax, legal, etc.)? 5 Consents: • Liaise with Lead Counsel. • Send notices or consent requests? • If consent required, have consent parties responded? 6 Stock Exchange: • What stock exchange are notes listed on? • Does an announcement regarding change of name need to be published?1 • Does the certificate of incorporation on re-registration as a DAC need to be sent to the stock exchange? 1 Required by the Irish Stock Exchange. APPENDIX 3 7 Revenue/Tax Notifications: • Irish revenue has confirmed they will not need to be notified of the change of name of SPVs regarding FATCA / Section 110 status. • Confirm whether new tax residency declarations are required for treaty claims and who is attending to this? • Are any non-Irish filings required (e.g. new US check the box elections)? 8 Conversion Documents: • Shareholder resolutions converting, changing name and amending constitutional documents. • Board resolution required to convert where SPV has listed debt in existence. • Amended constitutional documents for DAC, LTD or PLC updated for the purposes of the Companies Act 2014 to be prepared. Ensure any bespoke amendments contained in the existing constitutional documents are included in the new constitutional documents (e.g. classes of directors, consent rights, management and control in specific jurisdiction, limited purposes for Section 110, charges, etc.) 9 CRO Filing: • CRO conversion application form to be prepared and submitted with the required supporting documents. 10 Other Issues: • Is specific tax advice being sought or is it required for purposes of transaction documents or from investors regarding the conversion? • Tax advice will generally be to retain two directors on the board of any SPV to allow 'meetings' to occur as evidence of central management and control in Ireland. • Do updated constitutional documents / certificate of incorporation on re-registration need to be sent to transaction parties such as account banks for KYC purposes or to any stock exchange? • Update company seals, letterhead, stationery, signage and other relevant documentation where converted to a DAC.