PT - JOURNAL ARTICLE AU - Meredith Coffey TI - CLOs and Risk Retention: <em>The Other Shoe Drops</em> AID - 10.3905/jsf.2015.20.4.030 DP - 2015 Jan 31 TA - The Journal of Structured Finance PG - 30--33 VI - 20 IP - 4 4099 - https://pm-research.com/content/20/4/30.short 4100 - https://pm-research.com/content/20/4/30.full AB - The final U.S. Credit Risk Retention Rule for Securitizations was released by six federal agencies in October 2014. The content of the Final Rule was disappointing—if unsurprising—for an industry that spent four years offering up countless proposals. In effect, the Final Rule offers very little relief for collateralized loan obligations (CLOs). Nevertheless, the Final Rule may have been softened enough around the edges to make a continuing—if smaller—CLO market feasible. The agencies rejected several approaches suggested by the industry, including a proposal for a qualified commercial loan, a third-party equity option, and a qualified CLO, but they eased up on several issues critical to CLOs, removing the unworkable “cash throttle,” allowing risk retention by a CLO manager’s majority-owned affiliate, and permitting CLO managers to utilize full-recourse financing to support risk retention. Investors are likely to migrate toward managers that are expected to be risk retention survivors.TOPICS: CLOs, CDOs, and other structured credit, legal/regulatory/public policy, credit risk management