The CLO market has once again proved to be resilient in the face of regulatory headwinds as it registered its second best year on record in terms of new issuance last year. Coupled with a huge volume of refinancings and resets, all of the market participants had a very busy year. With a strong year behind us and an optimistic forecasted issuance this year, CLOs continue to demand over half of the domestic leveraged loan issuance.
As regulation continues to impact the leveraged loan and CLO markets and
their participants, new CLO asset managers and investors still continue to enter into the market. Contrary to expectations of many that the final risk-retention rules that went into effect on December 24, 2016, would shrink the market, most market participants have been able to assess, adapt, and incorporate the new rules into their business model. Furthermore, the need for third-party financing for risk retention solutions actually brought new investors and capital into the market, with demand for funding at times outpaced by supply. That said, on February 9th, the US Court of Appeals ruled that risk retention does not apply to managers of open market CLOs. While subject to appeal, at this writing it appears likely that CLO managers will have relief from complying with the risk retention rules.
Volta Finance Limited (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.