Wells Fargo warns on bankruptcy threat to GSC assets

In its latest CLO Market Update report, Wells Fargo says that it is unlikely that the assets in GSC Group’s CLOs would be affected by the bankruptcy of the manager, given that they are issued through a bankruptcy-remote special purpose vehicle. However, investors should work on the assumption that anything is possible in bankruptcy, it warns. It points out that there have been several recent rulings regarding the bankrupty remote treatment of securitisations, such as those concerning LTV Steel and GGP.

The chances of the CLO assets being consolidated into the bankruptcy estate depend on GSC’s ownership of equity in the deals, it adds.