TALF door for CLOs is still ajar, says Citi

In its latest CLO and loan market update report, Citi points out that last week’s Federal Reserve announcement may not mean that the door is completely closed on adding CLOs to the TALF programme. The Fed said it is “holding in abeyance” any expansion of the collateral types eligible for TALF funding.

Instead of expanding TALF to CLOs and other securitisation classes, the US central bank chose to extend the period for which this funding will be available to new issue ABS and legacy CMBS. Citi points out that some 60-70% of new issue buyers in these markets have used TALF financing this year.

But the Federal Reserve did leave the door slightly ajar for CLOs, as Citi points out, saying that other types of securities could be added to TALF if there were “unusual or exigent circumstances”.

Loan managers have lobbied hard to gain TALF funding for loan portfolios, arguing that this would improve credit conditions for hard-press high yield companies.