DEAL: first CLO with automatic margin reset

Author: Amélie Labbé | Published: 8 Sep 2017

Crescent Capital’s latest collateralised loan obligation (CLO) includes an embedded automatic refinancing feature, which is expected to make such future transactions cheaper and faster.

The deal could prove a significant development in the context of heightened risk retention requirements in the asset-backed securities (ABS) market. According to a person close to the deal, the AMR structure provides a cheaper, more efficient mechanism by which the deal parties can reset margin rates on different tranches of the CLO in an effort to avoid the costly and time-consuming refinancing process. 

The $413.7 million Atlas Fund, which closed at the end of July, comes with a built-in automatic margin reset (AMR) feature. It’s based on a mechanism which means that each class of debt is subject to auction after the mandatory two-year non-call period.

While the CLO fund itself is standard, with four or five tranches of debt and...