H.R. 4167 Press Release
SFIG ISSUES STATEMENT IN SUPPORT OF H.R. 4167, the Restoring Proven
Financing for American Employers Act


H.R. 4167 Addresses the Ownership Concern for CLOs Due to Volcker Rule

Washington, D.C. - March 12, 2014: The Structured Finance Industry Group, Inc. (“SFIG”), a member-based trade industry group focused on improving and strengthening the broader structured finance and securitization market, released the following statement today in response to Congressman Andy Barr’s (R-KY) introduction of H.R. 4167, The Restoring Proven Financing for American Employers Act:

“SFIG applauds Congressman Barr’s bill. It is a natural extension of both the bi-partisan efforts by Congress and the prioritization by the regulators to develop a solution to this unintended consequence of the Volcker Rule,” stated Richard Johns, SFIG’s Executive Director. “Congressman Barr’s bill helps address the ownership issue, and will allow companies across the United States to access affordable financing from local banks that invest in CLOs. We look forward to continuing our work with both Congress and the regulators to find a solution that creates a well regulated and liquid CLO marketplace.”

Background on the Volcker Rule and CLOs
Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Volcker Rule, issued on December 10, 2013, captures CLOs that contain any securities as “covered funds”. Most CLOs issued prior to the final rule either contain a small number of securities or have the ability to purchase securities, and are thus considered “covered funds”. One of the primary consequences of a CLO being treated as a covered fund under the Volcker Rule is that banks are not permitted to acquire or hold an “ownership interest” in that CLO.

CLOs provide the holders of debt securities - many of which are community and regional banks - with a number of creditor rights designed to protect their interests. The most notable of these rights is the ability to participate in the removal and replacement of the CLO manager “for cause,” such as breach of contract or fraud or criminal activities.

Under the Volcker Rule, however, such a right might be considered an “ownership interest,” which converts CLO debt securities into equity securities. Given that banks are not allowed to have ownership interests in “covered funds” under the Volcker Rule, they would have to divest roughly $80 billion in CLO holdings prior to July, 2015.

Businesses that operate in every state depend upon the funding provided by CLOs. These businesses include a broad range of industries, such as hospitality, healthcare, communications, manufacturing and utilities. Without a change to the Volcker Rule, such financing would be put at risk.

About Structured Finance Industry Group, Inc.
Structured Finance Industry Group, Inc. (“SFIG”) is a member-based, trade industry group focused on improving and strengthening the broader structured finance and securitization market. SFIG provides an inclusive network for securitization professionals to collaborate and, as industry leaders, drive necessary changes, be an advocate for the securitization community, share best practices and innovative ideas, and educate industry members through conferences and other programs. Members of SFIG represent all sectors of the securitization market including issuers, investors, financial intermediaries, law firms, accounting firms, technology firms, rating agencies, servicers, and trustees. Further information can be found at www.sfindustry.org

Media Contact:
Pat Tucker or Madelyn Dillabough
Abernathy MacGregor
pct@abmac.com / mhd@abmac.com
212-371-5999
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