In 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.
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