Jersey is diversifying its proposition in the US market, with its capabilities in the structured finance space. Over the first half of 2022, Jersey Finance estimates that more than 110 securitization structures, including Collateralized Loan Obligations (CLOs) and Collateralized Debt Obligations (CDOs) were registered, including a number migrating from other jurisdictions.
What are CLOs and who uses them?
CLOs are effectively investment instruments that are backed by a pool of leveraged corporate loans split into tranches, with different risk appetite. These instruments offer investors regular debt payments and diversification in their portfolio.
Why Jersey?
- Tax neutral status
- Experienced professional services industry to advise and administer CLOs
- Tax certainty and strong adherence to international standards on anti-money laundering (AML)
- Speed to market
What has changed?
Early 2022, the European Union (EU) added Cayman to its AML blacklist and the EU securitization regulation prohibits the establishment of securitization special purpose vehicles in countries listed on the EU AML blacklist. While the EU securitization regulation does not explicitly reference investors, the widely-held assertion is that the requirement to ensure that special purpose vehicles (SPV) are not established in a 'high risk country' for AML purposes, is also the investor's obligation.
Jersey is a tried and tested jurisdiction for securitization structures and this, together with its strong credentials in compliance with international standards, offers the much-needed certainty to CLO issuers and their investors.
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