Risk-retention innovators to explain how game-changing AMR will boost CLOs

Applicable margin reset (AMR) -  perhaps the most positive development for CLOs since the crisis - is set to radically change the way the CLO market functions, and delegates at the Creditflux CLO Investor Summit will learn all about what to expect from the brains behind the game-changing innovation

TAGS: Risk retention Sancus

Comment by: Anonymous. Posted 7 years ago [2016-09-29 14:39:34]

Why would a debt holder do this? AAAs are normally excluded from Repricings. If this increases the optionality of paper getting called away then a debt holder needs to be compensated. I expect this option to face major push back from debt investor when documents are negotiated.

Comment by: Anonymous. Posted 7 years ago [2016-09-28 17:46:13]

To the first commenter: You are missing something. It is not correct to say that the AMR provision will only have a benefit for the next 3 months. Any deal that has the AMR mechanic built in after the effective date of the Risk Retention Rules will allow the deal to reduce the spread of its debt tranches without requiring the sponsor to hold risk retention against such re-priced debt tranches. This is a huge benefit to sponsors that are holding horizontally that do not want to re-assess the fair value (which has likely gone down since the original closing date) of their equity they way they would be required to do so if they effectuated a non-AMR refinancing or re-pricing.

Comment by: Anonymous. Posted 7 years ago [2016-09-28 17:05:47]

Agree with most of the comment below. However - and there may only be a small chance of this happening - there is the possibility that AMR catches on as a non risk retention concept. The CLO market would be far healthier with a quarterly auction to reassess CLO liability spreads and bring the in line with market levels. Good for debt investors and equity alike

Comment by: Anonymous. Posted 7 years ago [2016-09-28 15:50:10]

No deals have AMR provisions as of today, and all deals will need to comply with RR after Christmas Eve. So AMR provisions would really only beneficial for any deals closing in the next ~ 3 months. To amend an existing deal to include AMR provisions would probably be fairly complex and require unanimous consent across the structure - tough to get. This seems like a very limited potential impact on the market. Am I missing something?