On August 28, 2013, six federal regulatory agencies (among them, the SEC, Federal Reserve, OCC and the FDIC (collectively, the “Agencies”)) released a 499 page second risk retention proposal (the “Second Proposal”). The Second Proposal covers risk retention for securitizers of all asset-backed securities, but also contains changes aimed directly at CLOs. For CLOs, the rules include both familiar provisions found in the first risk retention proposal (introduced in 2011) and new proposals, some of which are directed at alleviating the substantial burdens the Agencies themselves recognize the Second Proposal imposes on CLOs. Some of the proposals include new combinations of previously proposed forms of retention, new measurement metrics and holder eligibility criteria, hints at how grandfathering will be treated, a projected cash flow test for first-loss holders and an (likely ineffective) open market CLO option. The provisions outlined below do not reflect all changes found in the Second Proposal, but instead are meant to highlight some of the developments CLO participants may find important.Continue Reading Risk Retention Reproposal’s Impact on CLOs: Loan Arrangers Get Invited to the Party that No One Wants to Attend