The last few months of 2016 were a flurry of activity for the CLO market as managers rushed to issue new deals, or refinance existing ones, before rules requiring them to keep “skin in the game” take effect.

They must hold on to 5% of the economic risk of deals completed after Dec. 23. That’s a tall order for firms that acquire, rather than originate, the corporate loans that they securitize and have little balance sheet of their own.  The CLO industry actually got an early start tackling this requirement. Once the final rule was announced, on Dec. 24, 2014, it became difficult for managers to raise money unless they could demonstrate to investors that they had a strategy to comply.  

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