The Cayman Islands remains the top choice of domicile for US CLO Managers when establishing their issuer vehicles given Cayman’s reputation as a sophisticated, creditor friendly jurisdiction.
The Cayman Islands remains the top choice of domicile for US CLO managers when establishing issuer vehicles, due to Cayman’s reputation as a sophisticated, creditor friendly jurisdiction. CLOs securitise assets, typically leveraged loans, by pooling them together and paying out income and principal repayments from the pool to note holders. CLO investors buy tranches of notes with specific seniority and pay-out structures, hence taking different degrees of risk. Given its status as a recognised exchange, the Cayman Islands Stock Exchange is also a popular choice for managers should investors require that the notes be listed. Cayman’s removal from the EU AML list in February of 2024 has seen the market move back to Cayman as the jurisdiction of choice for issuer vehicles. This is excellent news for the jurisdiction since, at the time of going to print, 2024 looked to be close to a record year for new CLO issuance. In addition, there has been a flurry of refinancing and resets of earlier deals due to market conditions, highlighting the appetite amongst investors for CLO paper. Despite the current challenges in the market worldwide, CLO issuance continues to be robust, with many indications that this will continue.