SFIG News Treasury Report Securitization Fact Sheet Following the recent release of the U.S. Treasu

According to an ASReport article, the declining volume of existing U.S. CLOs eligible to refinance under the "Crescent Letter" exemptions is the primary contributor to the decline in issuance of CLOs in the third quarter.

In September, only about $7.6 billion of outstanding CLOs were refinanced or reset, bringing the total for the third quarter to $27.2 billion. That third quarter total pales in comparison to the first half of the year, when around $138 billion in CLO assets were reset or refinanced.

Under guidance from a Securities and Exchange Commission "no action" letter in July 2015 to Crescent Capital, regulators advised that managers of CLOs issued prior to December 2014 could retain the exemption to "skin in the game" rules through a limited, one-time refinancing arrangement.

The Crescent letter exemption, which allows only for a reduction in coupon rates and no changes to deal structure, is credited with spurring the approximate $39 billion in reset activity this year. As of July, estimates were that only around $34 billion in eligible CLO deals were left that met the conditions of the letter's allowances, according to Thomson Reuters LPC.

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