A deposit-insurance rule change that takes effect April 1 has been spurring issuance of collateralized loan obligations, according to Barclays.

In its weekly roundup of credit market research, Barclays notes that CLO creation has accelerated recently following a brief lull in early February. Analysts attribute this to managers’ desire to place deals ahead of a new Federal Deposit Insurance Corp. rule that could negatively affect spreads on triple-A tranches of these deals.

The report notes that 10 new CLOs with total assets of $5.3 billion priced in the first nine trading days of March.

The FDIC changed its definitions of certain higher-risk assets in February 2011 when it revamped its system for calculating the deposit insurance premiums banks must pay the agency. The rule applied to banks with assets of $10 billion or more.

Since this rule does not give any credit to the enhancement of the CLO triple-A tranches, there's been speculation that some bank investors might consider moving further down the capital stack, to double-A tranches, to offset the higher assessments.


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