The Loan Syndications and Trading Association, SIFMA, the Structured Finance Industry Group, the American Bankers Association, and the Financial Services Roundtable (together, the “Trade Associations”) have sent an additional letter to federal regulators requesting that they clarify how certain provisions in the recently issued “Volcker Rule” regulations apply to “Ownership Interests” in debt securities of issuers of collateralized loan obligations (“CLOs”). As in the letter submitted on December 24, 2013, the Trade Associations request that the regulators confirm that “ownership interest” does not include debt securities of CLO issuers that are covered funds where CLO debt securities have a contingent right to remove a manager “for cause” or to nominate or vote on a nominated replacement upon a manager’s removal for cause or resignation.
The Trade Associations went on to state that the confusion surrounding the ownership interests has already started to affect the CLO market, as banks currently hold $60-70 billion in CLO debt securities. The letter asked, at a minimum, that guidance be provided regarding debt securities of existing CLOs whose holders have creditor rights but do not have any of the indicia of ownership.
See: Comment Letter.
Related news: Trade Associations Request Clarifications Regarding Holding Debt Securities under New Volcker Rule Regulations (December 26, 2013).