Citi adds senior note watchdog to CLO

According to a ratings announcement by Moody’s, the recent COA Tempus CLO from Citi will include a novel feature designed to protect the interest of senior noteholders. According to Moody’s, an agent appointed by the majority of the class A1 investors will serve as a “designated advisor” to Fraser Sullivan, the manager of the portfolio. The advisors role will be to approve purchases made by Fraser Sullivan during the ramp-up period “on a limited basis”. For the rest of the deal’s life, the advisors will also have what Moody’s describes as certain rights related to discretionary sales.

This is thought to be the first time that an agent has been appointed to represent the interests of the senior investors in a CLO, and probably reflects the strong bargaining power of the triple A buyer in COA Tempus CLO. At one stage the triple A investor was rumoured to be threatening to pull out of the deal, and the triple A notes eventually priced at the top end of their expected range at 190 basis points over Libor.

See Citi prices benchmark CLO.