Dodd-Frank reprieve for CLOs

On Friday a bill was added to the House proposal schedule that could loosen the Dodd-Frank rules with respect to CLO ownership. The fact that equity holders have the right to vote to remove CLO managers has until now been a consideration that brings CLO ownership under Dodd Frank restrictions. Now, the right to remove a manager will no longer be dispositive. If passed, this modified rule may have the effect of helping to maintain a broader ownership base in CLOs among the dealing banks. It will codify the temporary reprieve that had been in place. Tens of billions of forced future selling may eventually be averted. Whew!