The CLOser February 2020 | Maples Group

AN INDUSTRY NEWSLETTER FOR THE GLOBAL CLO MARKET FEBRUARY 2020

Cayman Islands Vehicles Which Form to Choose?

Investors Warm to Evolution of CRE CLOs Your Global CLO Team A CLOser Look

Your Maples Group global CLO team provides Cayman Islands and Irish legal advice and CLO issuer / co-issuer and fiduciary services in the Cayman Islands, Delaware, Dublin, Jersey, London and the Netherlands.

This edition of The CLOser includes1:

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US and European CLO Market Reviews

Investors Warm to Evolution of CRE CLOs

Global Listings Update

Cayman Islands Vehicles – Which Form to Choose?

Your Global CLO Team – A CLOser Look

Data in this publication is derived from a variety of sources, including the Maples Group, Structured Credit Investor, LCD, Leveraged Loan, Creditflux, Moody’s, S&P, Fitch, Irish Stock Exchange and Central Bank of Ireland.

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February 2020 | 1

STOP PRESS! Calling All CLO Managers - Bonds are Back on Your Bucket List On 30 January 2020, the Federal Reserve, SEC and three other regulatory agencies published a re-proposal to the covered funds definition to Section 13 of the Bank Holding Company Act, also known as the Volcker Rule.

Proposed changes to the definitions of "loan securitization" and “ownership interest", if adopted, would allow a return of the 5% bond bucket for US CLOs. Under the current regime, US banks are barred from keeping an “ownership interest” in a “covered fund.” “Ownership interest” is broadly defined and includes not just the subordinated debt / equity of a transaction, but the most senior tranche (the AAA tranche) because that class of notes typically holds a right to remove the manager for cause. “Loan securitizations” are excluded from the definition of a “covered fund” therefore US banks have been able to invest in CLOs where the portfolio comprises only loans and short term cash equivalents (i.e. not bonds).

If the proposed changes are adopted, the “loan securitization” definition will be expanded to permit the acquisition and holding of up to 5% nonloan assets, such as bonds. Furthermore, senior debt tranches that bear certain hallmarks which are set out in the re-proposal will be able to take advantage of a ‘safe harbour’ from the definition of “ownership interest”, even if such notes carry the right to remove the manager for cause. AAA CLO notes typically bear such hallmarks.

If the proposed changes are implemented, a number of existing US CLOs have a springing bond bucket concept hard wired into the deal documentation. Existing CLOs that do not have that but who would want to take advantage of such regulatory changes would need to execute amendments after obtaining the requisite consents.

The proposal is subject to a 60-day comment period but the market expectation is that the proposals will be adopted.

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US CLO Market Review 2019 In Review Despite unease about global macroeconomic conditions, primary CLO issuance in 2019 was a solid US$118 billion, which exceeded expectations and shows the product as remarkably robust considering that 2018 was a record CLO 2.0 year at US$128 billion. However, limited refinancing / reset activity (US$46 billion compared to US$122 billion in 2018) meant that overall market activity was slower paced.

The number of priced new-issue deals (246) was an increase of five deals on 2018 and nine BSL managers launched their first post-crisis BSL CLOs: AGL CLO Credit Management, Birch Grove Capital, East West Investment Management, Elmwood Asset Management, Fort Washington Investment Advisors, Goldman Sachs Asset Management, Halsey Point Asset Management, Morgan Stanley Investment Management and Whitebox Capital Management. Meanwhile in the middle market, Audax Management Company, FS KKR Capital, Pennant Park and Owl Rock Capital also debuted.

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Sourced from LCD, Wells Fargo reports, Creditflux and Structured Credit Investor.

Below is a snapshot of highlights in 20192 : •

US$118 billion from 246 deals in 2019 compared to US$128 billion from 241 deals in 2018.

•

Refi and reset activity accounted for another US$46 billion in issuance from 93 CLOs.

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13 new CLO managers (BSL and MM).

•

While several BSL managers priced five CLOs, CIFC and Octagon managed to lead the pack, each pricing six CLOs.

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Bank predictions are that the new-issue market will not exceed US$100 billion

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2020 Outlook At Dana Point in December 2019, there was an expectation that 2020 CLO primary issuance would be down about 20% on 2019 levels. Several managers indicated they would be looking to push their 2020 deals through before the November US presidential election and ideally ahead of a possible rush (with consequential excess supply) as election day approaches. The year has indeed started at a steady and reasonable pace with some managers putting two or more warehouses in place for the year in January.

Bank predictions are that the new-issue market will not exceed US$100 billion (BAML and Barclays US$80-90 billion, Morgan Stanley US$75 billion, Wells Fargo US$90 billion) and general expectation of US$30-50 billion in refi / resets.

That being said, refi / reset activity is off to an exceptionally strong start in January. Market conditions and CLO vintage are once again more aligned and dozens of new cleansing notices have been issued with managers looking to press ahead with one or more refinances and resets on tight timeframes. We are aware of in excess of 30 transactions looking to refi at this point in time.

The first CLO incorporating applicable margin reset (“AMR”) provisions in the transaction documents, TCW CLO 2019-1 AMR, Ltd., utilised Kopentech’s digital platform to refinance five debt tranches through an auction process on 30 January 2020. The AAAs, which were capped at 115bps for the auction, priced at 107bps and overall the weighted average cost of capital was reduced by 43bps. While the auction process was declared a success by those involved, there are some concerns about operational aspects and the slight premium paid by investors to encourage the brokerdealers to participate.

Turning to a trend we expect to see much more of in the coming decade, the environmental, social and governance (“ESG”) movement is worth mentioning. While the European market was the first to close a CLO with ESG criteria embedded in the asset eligibility criteria in March 2018 (Providus CLO I, managed by Permira Debt Managers), it

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more recently closed a fully ESG-compliant CLO (North Westerly VI via NIBC Bank). With eyes focussed on Australia’s fires, Greenland and Antarctica’s melting icecaps and heightened concerns about the planet and social issues, Blackrock told its clients in January that it intended to take a stronger stance on climate change by exiting investments in thermal coal, noting that climate risk is an investment risk that will impact the long-term performance of portfolios.

In December 2019, the new EU Disclosure Regulation EU/2019/2088 on disclosures to be made by asset managers and investment funds relating to sustainable investments and sustainability risks came into force as part of a process to put into effect the European Commission’s Action Plan for Sustainable Finance which sets out the EU strategy to integrate ESG considerations into its financial policy framework and mobilise finance for sustainable growth. For more information on the regulation, see here3 .

With an uptick in ESG ETFs and other investment products, we fully expect to see the ESG movement gain significant momentum with the result that ESG provisions will likely be incorporated into US CLOs in the near future. The start of a new decade brings time for reflection and looking forward.

2020 is a good time to start embracing socially responsible investing.

Ending on what promises to be a positive note and what may spur higher issuance levels in 2020, the Federal Reserve has announced that it proposes to change the covered funds definition in the Volcker Rule which should hopefully mean the return of the 5% bond buckets in US CLOs. Notwithstanding the upcoming US presidential election in November, we anticipate another successful and stable year for the US CLO market and we look forward to continuing our partnership with our friends and colleagues in the CLO industry.

For further details, please contact: Mark Matthews Scott Macdonald +1 345 814 5314 +1 345 814 5818 mark.matthews@maples.com scott.macdonald@maples.com Nicola Bashforth +1 345 814 5213 nicola.bashforth@maples.com

We fully expect to see ESG provisions being incorporated into US CLOs

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https://maples.com/Knowledge-Centre/Industry-Updates/2020/01/New-ESG-Disclosure-Requirements-for-EU-Funds-and-Asset-Managers

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2019 proceeded to shatter the new issuance record

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European CLO Market Review 2019 In Review European CLO issuance started slowly in 2019 with only one deal closing in January 2019. This issuance was more than likely a consequence of the market getting to grips with the implementation of the new disclosure and reporting obligations contained in the Securitisation Regulation which came into effect on 1 January 2019. Nevertheless, the market quickly got to grips with these requirements and, as 2019 progressed, issuance levels quickly rebounded to such an extent that the previous high-water mark of €27.5 billion set in 2018 was exceeded by more than 8% at €29.8 billion.

2019 also saw eight debutant managers joining the ranks of the European CLO manager stable compared with four in the prior year.

However, despite the unprecedented levels of new issuance, as with 2018, refi and reset activity in 2019 did not hit the heady heights attained in 2017. As a result the total issuance for 2019 reached €41.3 billion, down slightly from €43.7 billion in 2018 and the record high of €45.7 billion in 2017.

Securitisation Regulation4 – one year on…

The Securitisation Regulation took effect across the EU on 1 January 2019.

Despite the focus on reforms to risk retention throughout the negotiation of the regulation, some of the trickiest challenges, and the least expected, arose

Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12th December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012.

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out of the final form transparency and disclosure provisions contained in Article 7 of the Securitisation Regulation (the “Disclosure Requirements”).

2020 Outlook

After an uncertain start to 2019, the CLO market gradually settled on a formula for compliance with the Disclosure Requirements, with the issuer vehicle generally being designated as the reporting entity and the transparency and disclosure process itself being administered and stewarded by a combination of inputs from collateral managers and collateral administrators.

Despite challenges to the European CLO market in late 2019, including the widening of spreads on AAA tranches and challenges around loan supply compounded by an ever increasing pool of CLO managers, market participants are predicting that the European CLO market will perform robustly in 2020 and achieve new issuance levels of approximately €25 billion.

The regulatory technical standards to be developed by ESMA under the Securitisation Regulation for the purposes of complying with the Disclosure Requirements were not in place for the commencement of the Securitisation Regulation and while the EU Commission adopted and published the final version of the regulatory technical standards (including disclosure templates) in October 2019, at the time of writing, the application date of the regulatory technical standards has not yet been specified.

Commentators are pointing to a number of contributory factors including a pipeline of up to 50 transactions in warehouse phase, early indicators of an uptick in primary loan market activity as well as a steady increase in CLO managers (responding to ongoing investor demand) looking to join in sustainable finance initiatives and brand their CLO transactions as ESG compliant.

Pending the adoption of the regulatory technical standards and disclosure templates, market participants have sought to comply with the spirit, if not the letter, of the Disclosure Requirements by the provision of collateral manager / investor quarterly reports through secure websites. Once adopted, all transactions within the scope of the Securitisation Regulation will need to comply with the regulatory technical standards in respect of the Disclosure Requirements. Since there remains significant uncertainty as to the proper form for compliance with the regulatory technical standards, clarification has been sought by industry participants on these matters. ESMA has recommended to the European Commission that a transition period of 15 to 18 months be granted for the implementation of certain of the Disclosure Requirements.

However, at present there is no certainty that such a transition period will be granted and, if it is, what exactly the conditions and term of such a transition period would be.

Despite the formal departure of the UK from the EU on 31 January 2020, continued uncertainty remains as regards the length of the Brexit transition period, and ultimately the final form which the departure takes vis-à-vis its ongoing relationship with the remaining EU member states. This will all be taking place in parallel with the upcoming US presidential election in November. The outcome of these geopolitical events will have significant influence on global economic conditions and the performance of the financial markets in 2020.

Given the number of variables in play it will remain to be seen whether the European CLO market will set a fifth consecutive new issue record in 2020!

For further details, please contact: Stephen McLoughlin +353 1 619 2736 stephen.mcloughlin@maples.com Callaghan Kennedy +353 1 619 2716 callaghan.kennedy@maples.com

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2019 also saw eight debutant managers joining the ranks of the European CLO managers

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Investors Warm to Evolution of CRE CLOs This year’s annual Commercial Real Estate Finance Council (“CREFC”) convention in Miami claimed the largest attendance since the credit crisis with over 1,800 registered participants and speculation that around 2,500 persons involved in the commercial real estate market had descended on South Beach.

2019 saw over US$19 billion of CRE CLO loan issuance from 29 deals and 24 sponsors. This was up over 35% on 2018 which ended just shy of US$14 billion with 25 deals from 19 different sponsors. 2019 saw five first-time issuer / sponsors launching a CRE CLO. While there were occasional reservations at the conference about the continued high level performance of the sector in light of where we are in the current credit cycle, including concerns about sectors such as retail, the overall mood was buoyant, some might even say bullish, with an expectation that 2020 CRE CLO issuance would match, if not surpass, 2019.

Much of the growth of the CRE CLO market can be attributed to the fact that the CRE industry is very sensitive to interest rates and the volume of deals proliferated in the extremely low interest rate climate of the past decade where the US Federal Reserve cut interest rates and held them at record low levels in order to stimulate economy. This growth was further fuelled by the injection of approximately US$3.5 trillion of liquidity into the US financial system from 2008 to 2014 via the US Federal Reserve’s quantitative easing programmes (Thomson Reuters).

REGISTERED PARTICIPANTS AT CREFC CONVENTION

CRE CLO LOAN ISSUANCE IN 2019

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Financing strategies in the US commercial real estate sector remain in sharp focus at the current time. The longest economic expansion on record and rapid developments in the technology sector, coinciding with the co-working phenomenon, has resulted in huge demand for office space, while at the same time, concerns exist over the potential impact of a recession on the commercial real estate market, amid news reports of over 7,000 US store closures in the first half of 2019. Taking a step back to examine the growth of the CRE CLO product there are a number of other features that have proven popular in this environment, drawing new issuers, alongside managers already well established in other product areas to debut their CRE CLO offerings to the market.

Moving from Static to Managed Deals Between 2012 and 2014, CRE CLOs were largely static deals, meaning that, upon prepayment of loans, those funds would be used to pay down the notes and there was no ability to reinvest in new assets. Between 2014 and 2017, there was a shift from static deals to lightly managed deals which were restricted in that principal proceeds could be reinvested, but only in existing assets. By 2017, the market was moving towards fully managed CRE CLOs which now make up a majority of issuance and enable the issuer to reinvest in completely new assets that meet the investment parameters set out in the deal documents. This transition to managed deals provides flexibility and greater opportunities to earn yield which is attractive to investors.

Asset Quality The underlying assets of CRE CLOs are first lien mortgages, primarily (and sometimes entirely) in multi-family housing units such as apartment buildings. High quality multi-family

developments often provide stable levels of occupancy to support the transaction and a diverse and stable pool of borrowers. Offices, hotels and other commercial property loans also feature in the collateral, though generally to a lesser extent than is seen in typical commercial mortgagebacked securities (“CMBS”) transactions. Additionally, there is the future funding component to the loans that allows the sponsors to stabilise or upscale the property, with a view to increasing rental income.

With first lien mortgages as assets, proponents of CRE CLOs claim they offer increased security with lower leverage, which attracts investors given the yield pickup on CMBS. These deals are managed by highly motivated sponsors that for US regulatory reasons take down not only the requisite retention piece of equity, but often more.

Credit Quality CRE CLOs some may say are arguably similar to pre-crisis CRE collateralised debt obligations (“CDOs”), except there is an important differentiating factor. Pre-crisis CRE CDOs were largely backed by subordinated loans and other debt securities while CRE CLOs today are almost exclusively collateralised by floating rate first lien bridge loans secured over real estate, resulting in lower leverage and a greater quality of assets and security.

Investors and Borrowers While investor preference for shorter dated floating rate notes during a period of rising interest rates underpinned the rapid growth in CRE CLOs over the past few years, the yield pickup should still be attractive in a low interest rate environment suggesting the CRE CLO is well positioned to meet investor needs. From a borrower’s perspective, CRE

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CLOs offer greater flexibility and exemption from Real Estate Mortgage Investment Conduit rules is attractive, as is the ability of the structure to accommodate transitional loans for buildings undergoing renovation which may need be extended or renegotiated.

As the interests between highly motivated sponsors and investors have aligned around CRE CLOs, it has served to enhance the attractiveness of this asset class and bolster the market.

Observations by the Maples Group The Maples Group advises and acts for many of the more prominent market participants, including some of the more notable, new entrants to the structured commercial real estate sector. This broad experience, coupled with extensive exposure to CRE CLOs, CMBS and across all the major securitisation product lines, provides us with a useful perspective on the driving characteristics of CRE CLOs and broader, more market-centric skills, from a fiduciary standpoint.

From a fiduciary perspective, unlike broadly syndicated loan CLOs, where the board is exclusively comprised of independent directors from the Maples Group, CRE CLOs generally operate on a split board basis. The split board means that one or more senior executives from the manager sit on the board as a director alongside the independent directors from Maples. Having a director from the manager on the board is not purely for practical purposes such as aiding execution of underlying asset documentation, but in particular, for managed CRE CLOs, even though day-to-day management may be delegated to the sponsor as manager, questions may still arise for the board to consider. The underlying assets are tangible real estate, often tenant occupied.

Luana Guilfoyle Vice President, Maples Group – Cayman Islands

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The evolution of CRE CLOs from static deals into fully managed deals with additional features that enhance the offering for investors, highlights the growing need for fiduciary service providers to be well versed in more complex products and to be aware of the lessons learnt from the credit crisis.

The depth and breadth of knowledge housed within the Maples Group and particularly from our active participation in transactions which span pre-crisis and post-crisis, means that our independent directors add significant value through this insight and experience.

As we continue to see greater deal flow of CRE CLOs, market participants have come to appreciate that engaging a skilled and experienced fiduciary partner, who understands the particular nuances of this product, is paramount to a successful structure. The Maples Group provides independent managers, directors and services in the United States and across the key CLO jurisdictions globally, working synergistically to ensure an optimal experience for clients.

Wendy Ebanks Senior Vice President, Maples Group – Cayman Islands

Jeffrey Everhart Vice President, Maples Group – Delaware

The Maples Group continues to work with seasoned and new issuers in this area. We represent over 50% of the market, providing Cayman Islands’ legal advice and Cayman and / or Delaware fiduciary and regulatory services to the issuers.

For further details, please contact: Nicola Bashforth +1 345 814 5213 nicola.bashforth@maples.com Luana Guilfoyle +1 345 814 5853 luana.guilfoyle@maples.com

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Global Listings Update Irish Listings Update During the second half of 2019, 117 CLOs (US and European), comprising new issuances, refinancings and resets, were listed on Euronext Dublin. Of these listings, 49 were by Cayman Islands issuers (42%), 54 were Irish issuers (46%) and 14 were Dutch issuers (12%). The Maples Group’s Dublin office listed 35% of all Euronext Dublin-listed CLOs and 49% of all Cayman Islands issuers listing on Euronext Dublin.

For the year in full, a total of 200 CLOs (US and European) were listed on Euronext Dublin. Of these, there were 100 Cayman Islands issuers (50%), 80 Irish issuers (40%) and 20 Dutch issuers (10%). The Maples Group’s Dublin office listed 37.5% of all Euronext Dublin-listed CLOs and 52% of all Cayman Islands issuers listing on Euronext Dublin.

For further details, please contact: Ciaran Cotter +353 1 619 2033 ciaran.cotter@maples.com

Cayman Islands Listings Update In 2019, the Cayman Islands Stock Exchange (the “CSX”) cemented its position as a leading platform on which to list CLOs. During 2019,

the CSX recorded a total of 605 new listings, only marginally down from the 621 new listings recorded on the CSX in 2018. Specialist debt securities, including CLOs, represented the largest proportion of new listings during 2019 (87.6%), helping to increase the market capitalisation for all securities listed on the CSX

by US$118 billion to over US$428 billion by the end of 2019.

54 CLO issuers listed on the CSX in 2019, comprising BSL / MM new issuances, refinancing and resets. Of the 54 CLOs listed, 96% were by Cayman Islands issuers with a Delaware coissuer. Our Cayman Islands office listed 62% of all BSL / MM CLOs listed on the CSX and 47% of all products listed on the CSX in 2019. Our Cayman Islands office also listed the first dual listing of which we are aware, with a Cayman Islands CLO issuer and a Delaware co-issuer listing three classes of notes on the CSX and three classes of notes on Euronext Dublin.

The CSX continues to be highly regarded in the market as a practical and efficient exchange for CLO listings where investors do not require a European nexus.

For further details, please contact: Amanda Lazier +1 345 814 5570 amanda.lazier@maples.com

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Cayman Islands Vehicles – Which Form to Choose?

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2019 marked the year in which a Cayman LLC was first employed as the note issuance vehicle in a CLO. The manager was Bain Capital and the deal was BCC Middle Market CLO 2019-1. The desire at the outset of that transaction was to model the Cayman issuer’s limited liability company agreement, as far as possible, on the Delaware issuer’s limited liability company agreement from Bain’s first CLO for their Business Development Company (or BDC) named Bain Capital Specialty Finance, Inc. Thanks to the flexible nature of the Cayman Islands Limited Liability Companies Law and the fact that such law is, at least in part, based on existing Delaware legislation, many of the provisions and concepts of the precedent deal, which had a sole Delaware LLC as its issuer, could be taken and adapted easily to make them fit within the applicable regulatory and legal framework of the Cayman Islands. Indeed, the Cayman LLC is a vehicle that, in many respects, perhaps ought to sit more comfortably with, and be more familiar in terms of its operation and management to, US lawyers and CLO participants. Due to traditional use and familiarity with the Cayman Islands exempted company with limited liability, however, the flexibility of the Cayman LLC and the applicable regulatory and legal framework, together, have not yet translated into significant usage of the vehicle in structured finance transactions: most commonly, we see the Cayman LLC employed in warehousing structures only, and often for a limited duration (and with limited life) due to their merger with, and into, the CLO issuer at closing.

Cayman Islands exempted companies with limited liability, together with Cayman LLCs and Cayman Islands exempted limited partnerships are the three main forms of entity that we see involved in CLOs. The distinctions between these three different entity forms are perhaps not widely known or not fully understood, yet those distinctions may influence or instruct the choice based on application or particular desires of managers, arrangers and/or investors. We set out below an overview of the key distinguishing features and we continue to monitor market appetite for these different forms of entity with a view to reporting back on any new trends that may emerge during 2020 and beyond, especially following on from Bain’s seminal deal of 2019.

For further details, please contact: James Reeve +1 345 814 5129 james.reeve@maples.com

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EXEMPTED COMPANY (“COMPANY”)

LIMITED LIABILITY COMPANY (“LLC”)

EXEMPTED LIMITED PARTNERSHIP(“ELP”)

SEPARATE LEGAL PERSONALITY

A Company is a body corporate with separate legal personality.

An LLC is a body corporate with separate legal personality. An ELP does not have separate legal personality.

An ELP conducts its business through its general partner (which is typically a Cayman Islands exempted Company).

ESTABLISHMENT

The memorandum and articles of association must be submitted to the Registrar of Companies, together with the appropriate filing fees (see below) and a statement from the subscriber which confirms that the operations of the Company will be conducted mainly outside of the Cayman Islands.

Registrar of Limited Liability Companies which sets out basic information regarding the LLC and the appropriate filing fees (see below).

Registrar of Exempted Limited Partnerships a statement setting out certain prescribed information and pay the appropriate filing fees (see below).

Once the Registrar of Companies has processed these documents, the Company will be deemed to have been incorporated and a Certificate of Incorporation will be issued.

A registration statement must be submitted to the Registrar of Limited Liability Companies which sets out basic information regarding the LLC and the appropriate filing fees (see below).

A Certificate of Registration issued by the Registrar of Limited Liability Companies shall be conclusive evidence that the requirements of the LLC Law have been complied with in respect of the formation and registration of an LLC.

Generally three to five working days, but can be expedited by paying an express fee (see below) so that a Certificate of Registration can be provided within one business day.

A Certificate of Registration issued by the Registrar of Exempted Limited Partnerships shall be conclusive evidence that the requirements of the ELP Law have been complied with in respect of the formation and registration of an ELP.

HOW LONG DOES IT TAKE TO ESTABLISH?

Generally three to five working days, but can be expedited by paying an express fee (see below) so that a Certificate of Incorporation can be provided within one business day.

Generally three to five working days, but can be expedited by paying an express fee (see below) so that a Certificate of Registration can be provided within one business day.

CURRENT GOVERNMENTAL FEES ON ESTABLISHMENT

US$731.71, with an additional US$975.61, with an US$1,220, with an additional US$487.80 for the express additional US$487.80 for the US$487.80 for the express service. express service. service.

ANNUAL GOVERNMENTAL US$853.66 FEES FOR MAINTENANCE OF VEHICLE IN GOOD STANDING

US$975.61

US$1,463

MAIN CONSTITUTIONAL DOCUMENT

Limited liability company agreement ("LLCA").

Limited partnership agreement ("LPA").

Memorandum and articles of association ("M&A").

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EXEMPTED COMPANY (“COMPANY”) MINIMUM / MAXIMUM NUMBER OF SHAREHOLDERS / MEMBERS?

Minimum of one shareholder; no maximum (subject to any restrictions in the M&A and there being sufficient authorised share capital).

LIMITED LIABILITY COMPANY (“LLC”)

EXEMPTED LIMITED PARTNERSHIP(“ELP”)

Minimum of one member; An ELP must have at least no maximum (subject to any one general partner and one restrictions in the LLCA). limited partner and there is no maximum number of partners (subject to any restrictions in the LPA).

At least one of the general partners has to be either an individual resident in the Cayman Islands, a company incorporated or registered as a foreign company in the Cayman Islands, an ELP or a foreign limited partnership registered in the Cayman Islands.

ANY NAMING CONVENTIONS?

It is not necessary for a Company's name to contain words or abbreviations such as: 'Limited', 'Ltd', 'Inc' or 'Corp' etc. but there are certain names for which consent of the Registrar of Companies is required, for example: names including the words 'royal', 'imperial', 'bank', 'assurance' and 'insurance'.

Dual company names are permitted (one in English and one in foreign script).

A newly incorporated Company cannot use the words "Limited Liability Company" or the abbreviations "L.L.C." or "LLC" in its name

ARE OWNERSHIP RECORDS CERTIFICATED?

A Company may, but is not obliged to, issue a share certificate in respect of certain of its shares.

The Companies Law defines a shareholder as the person registered in a Company's register of members. A share certificate is only prima facie evidence of any shareholding reflected in a Company's register of members

It is not necessary for an LLC's name to contain words or abbreviations such as 'LLC', 'L.L.C.' or 'Limited Liability Company' etc. but there are certain names for which consent of the Registrar of Limited Liability Companies is required, for example: names including the words 'royal', 'imperial', 'bank', 'assurance' and 'insurance'. The Registrar of Limited Liability Companies may decline to register a name which for any reason is calculated or likely to mislead.

An ELP's name must contain the words 'Limited Partnership' or the abbreviations 'L.P.' or 'LP'.

The use of certain words is restricted. The Registrar of Exempted Limited Partnerships may decline to register a name which for any reason is calculated or likely to mislead. An ELP may have an additional dual foreign name which either precedes or follows its name.

Dual company names are permitted (one in English and one in foreign script).

It is possible to issue certificates evidencing an LLC interest. Please note that certification of an LLC interest may in some cases preclude pass-through tax treatment in some non-US jurisdictions (e.g. the UK).

We recommend advice be sought from qualified advisers in those other jurisdictions.

Partnership interests are usually not certificated.

The ultimate record of ownership is generally determined by the register of limited partners and the record of contributions maintained by the general partner on behalf of the limited partnership.

An LLC's register of members is prima facie evidence of the matters contained therein.

The register of limited partners is prima facie evidence of the matters contained therein.

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EXEMPTED COMPANY (“COMPANY”) TAX

LIMITED LIABILITY COMPANY (“LLC”)

EXEMPTED LIMITED PARTNERSHIP(“ELP”)

There are no corporate, capital gains, income, withholding, estate or inheritance taxes in the Cayman Islands.

There are no corporate, capital gains, income, withholding, estate or inheritance taxes in the Cayman Islands.

There are no corporate, capital gains, income, withholding, estate or inheritance taxes in the Cayman Islands. On application by a general partner, an ELP can expect to receive an undertaking from the Financial Secretary that no form of taxation or profits, capital gains or inheritance will apply to the ELP or to any partner thereof in respect of the operations or assets of the ELP or the partnership interest for a period of up to 50 years from the date that the undertaking is given should such legislation be introduced in the Cayman Islands.

No corporation tax is imposed. A Company may apply for an undertaking from the Financial Secretary of the Cayman Islands to the effect that the Company will be exempt for a period of 20 years from the date of such undertaking from taxation on profits, capital gains or inheritance should such legislation be introduced in the Cayman Islands.

An LLC may apply to the Financial Secretary for (and expect to obtain) an undertaking that the LLC will be exempt for a period of 50 years from issue from taxation on profits, capital gains or inheritance should such legislation be introduced in the Cayman Islands.

HOW ARE ASSETS HELD?

A Company is capable of holding assets and property in its own name.

An LLC is capable of holding assets and property in its own name

An ELP may hold assets in its name or assets may be held by the general partner(s).

As an ELP does not have separate legal personality, the ELP Law provides that any rights or property of an ELP are held or deemed to be held by its general partner(s) as an asset of the ELP pursuant to the terms of the LPA.

WHAT ARE THE CHARACTERISTICS OF OWNERSHIP?

A share represents an equity interest in a Company. A shareholder has the rights and benefits attaching to its shares in accordance with the Memorandum and Articles, any separate contractual agreement (such as a subscription agreement) and as set out in the Companies Law. These may include rights to vote, appoint or remove directors, receive dividends and redemption rights.

An LLC interest includes a member's share of profits and losses which may be allocated among members and among classes or groups of members, as provided in the LLC Agreement. A membership interest in the LLC also may include the right to receive distributions of an LLC's assets and a member's voting or other rights, benefits and obligations to which the member is entitled or subject pursuant A Company has no minimum to the LLC Agreement or the paid-in capital requirement LLC Law. and a Company may elect one or more currencies in which shares are issued.

A limited partnership interest includes a partner's share of profits and losses which may be allocated among partners and among classes or groups of partners, as provided in the LPA. An interest in the ELP also may include the right to receive distributions of an ELP's assets and a partner's voting or other rights, benefits and obligations to which the partner is entitled or subject pursuant to the LPA or the ELP Law.

February 2020 | 21

WHO IS RESPONSIBLE FOR THE MANAGEMENT?

EXEMPTED COMPANY (“COMPANY”)

LIMITED LIABILITY COMPANY (“LLC”)

EXEMPTED LIMITED PARTNERSHIP(“ELP”)

It is possible for the beneficial interest in a share to be transferred without the transferee being admitted as a shareholder of the Company.

It is possible for the benefit of an LLC interest to be assigned without the assignee being admitted as a member of the LLC.

It is possible for the benefit of a limited partnership interest to be assigned without the assignee being admitted as a partner of the ELP.

Subject to the Memorandum and Articles, the director(s) of a Company are responsible for the management and affairs of a Company.

An LLC may be governed by some or all of its members or by appointed non-member managers.

Unless otherwise specified in the LLC Agreement, the management of an LLC will be vested in its members acting by a majority in number.

The general partner of the ELP is responsible for its management.

A limited partner may lose the benefit of limited liability if it engages in the conduct of the business of the ELP with persons who are not partners in the ELP. A limited partner will only be held liable in such circumstances to a person who is a person who transacted business with the ELP during the relevant period with actual knowledge of such participation and who then reasonably believed that the limited partner was a general partner.

The ELP Law provides a number of "safe harbour" activities which a limited partner may undertake without being deemed to take part in the conduct of the business of the ELP. Examples include: acting as a director of the general partner, consulting/advising the general partner and appointing a person to serve on a committee of the ELP.

22 | The CLOser

EXEMPTED COMPANY (“COMPANY”) HOW IS PROFIT AND CAPITAL RETURNED TO THE OWNERS?

A Company may make distributions by way of dividend out of profits or share premium account, subject to any restrictions in the Memorandum and Articles.

A Company may also redeem or repurchase its shares and may make a payment in respect of such redemption or repurchase in any manner permitted by the Companies Law and its Memorandum and Articles.

WHAT BOOKS AND RECORDS A register of members must be maintained by the MUST BE KEPT? Company, which is not open to public inspection, at such location in the Cayman Islands or overseas as the Company may determine.

LIMITED LIABILITY COMPANY (“LLC”) An LLC can return cash or assets to its members by a variety of means, including distributions, release from obligation and return of contributions.

An ELP can return cash or assets to its limited partners by a variety of means, including distributions, release from obligations and return of contributions.

There is a limited statutory clawback which applies where a member receives a distribution (or is released from an obligation) when an LLC is insolvent and the member has actual knowledge of such insolvency at the time the distribution is made.

There is no express time limit on when the clawback may occur, nor is there any statutory interest rate applicable to any amount clawed back under these provisions.

The ELP Law provides a clawback mechanism for a period of six months commencing on the date of the relevant payment or release in the event that the ELP was insolvent at the time of the payment or release (including where the payment or release caused the insolvency) provided that the limited partner had actual knowledge of the insolvency of the ELP. Interest is charged at a statutory rate of 10% on any amount clawed back under these provisions, provided that this rate may be varied in the LPA.

A register of members must be maintained by an LLC at its registered office or at any other place within or outside the Cayman Islands. It is only open to inspection by such persons as are expressly provided A Company can maintain for in the LLC Agreement or one or more branch otherwise as permitted by registers of such category or the manager. This must be categories of members as it updated within 21 days of may determine. A duplicate any change. The LLC must of any such branch register keep at its registered office must be maintained with a record of the address the principal register and be where the register of updated within 21 days of members is maintained. any change being made to the branch register.

An LLC must keep at its registered office a register A Company must keep at its of managers, and shall send registered office a register a copy to the Registrar of of all mortgages and Limited Liability Companies. charges.

A Company must keep at its registered office a register of its directors and officers, and shall send a copy to the Registrar of Companies.

EXEMPTED LIMITED PARTNERSHIP(“ELP”)

A register of limited partners must be maintained by the general partner, which is not open to public inspection, at such location in the Cayman Islands or overseas as the general partner may determine. The default position under the ELP Law is that this register is open to inspection by all partners, but this may be varied by the LPA. The general partner must also maintain or cause to be maintained in any location a record of the amount and date of the contribution(s) of each limited partner and the amount and date of any return of the whole or part of the contribution of any limited partner. This must be updated within 21 days of any change.

February 2020 | 23

EXEMPTED COMPANY (“COMPANY”) A Company must either keep a beneficial ownership register at its registered office, if within the scope of the beneficial ownership regime, or must maintain an up-to-date written confirmation of exemption with its registered office.

A Company must keep proper books of account, at any place inside or outside the Cayman Islands, giving a true and fair view of the state of the Company's affairs and to explain its transactions. Such books of account must be maintained for a minimum period of five years from the date on which they were prepared.

LIMITED LIABILITY COMPANY (“LLC”) An LLC must maintain or cause to be maintained in any country or territory, a record of the amount and date of the contribution of each member and the amount and date of any payment representing a distribution or, otherwise, a return of the whole or any part of the contribution of any member. This must be updated within 21 days of any change An LLC must keep at its registered office a register of all mortgages and charges.

A register of security interests describing any security interests granted by members over their LLC interests, if any, must be maintained at the Cayman Islands registered office of the LLC. An LLC must either keep a beneficial ownership register at its registered office, if within the scope of the beneficial ownership regime, or must maintain an up-to-date written confirmation of exemption with its registered office.

An LLC must keep or cause to be kept proper books of account including, where applicable, material underlying documentation.

The documents must be sufficient to give a true and fair view of the business and financial condition of the LLC and to explain its transactions. The books of account must be maintained for a minimum of five years from the date which they were prepared.

EXEMPTED LIMITED PARTNERSHIP(“ELP”) A register of security interests describing any security interests granted by limited partners over their limited partnership interests, if any, must be maintained at the Cayman Islands registered office of the ELP by the general partner.

A general partner must keep or cause to be kept proper books of account including, where applicable, material underlying documentation.

The documents must be sufficient to give a true and fair view of the business and financial condition of the ELP and to explain its transactions. The books of account must be maintained for a minimum of five years from the date which they were prepared.

24 | The CLOser

Your Global CLO Team – A CLOser Look Amanda Lazier

Associate, Legal Services +1 345 814 5570 amanda.lazier@maples.com

I joined the Maples Group in the Cayman Islands in 2014 as an associate in the Finance Group. My practice focuses on advising clients on structured finance transactions, particularly CLOs, securitisations, repackagings, credit funds and other CLO investment structures; as well as on fund finance and banking transactions, in which I represent hedge funds, private equity funds and banks on lending transactions, bank products, deal structures and on all types of secured transactions. I am also a leading expert in our Group in obtaining listings for clients on the Cayman Islands Stock Exchange.

February 2020 | 25

1. How did you end up working at the Maples Group in the Cayman Islands?

Four days before Christmas, during what was to become the last winter I would spend in Canada, a crippling ice storm descended upon Toronto and surrounding areas and I spent two full days without power, playing board games by candlelight with my husband and my mother, hoping that the water pipes would not freeze and rupture. Although electricity was, eventually, restored, the deep freeze that had settled upon Toronto did not lift. That winter was so cold that mascara would freeze to one’s eyelashes while standing outside waiting for the streetcar; and then immediately melt down one’s face once you were aboard the heated streetcar.

And so, not unlike the tornado that picked up Dorothy and carried her to the magical land of Oz, the Arctic winds (resembling cyclones!) known as a polar vortex whisked me away from Canada and deposited me on the sandy sun-filled shores of the Cayman Islands.

I attended university on the East Coast of Canada, pursuing an honours degree in philosophy with a minor in Greek mythology, at Dalhousie University in Halifax, Nova Scotia, but I had returned to my hometown of Toronto, Ontario, to attend law school and embark upon my legal career. In my first year at the University of Toronto law school, I accepted a summer student position with Blake, Cassels and Graydon LLP. One summer turned into two, and then an articling position, and once I was called to the bar in 2009, I joined the Securities Group at Blakes as an associate.

By the time the ice storm compounded by the polar vortex hit, three decades of Canadian winters had taken their toll. My husband and I packed up our house and boarded a plane, with our little dog too. We rented a place on the beach, promptly settled into island life, and celebrated the fact that my new commute to Ugland House consisted of a 10-minute drive along the ocean in an open top Jeep, 365 days a year. It did not take long to forget our worries about freezing water pipes and outdoor streetcar platforms.

I will always be a proud Canadian at my maple syrup core, but I have traded in my fur-lined boots for strappy sandals and I am very happy to call the Cayman Islands my home – as there is no place quite like it.

2. What do you like to do outside the office?

I am one of those enthusiastic (also known as annoying, according to my husband) “morning people” who think it is normal to get up at 5am to exercise. I am generally up for any cardio-based activity, as long as it is intense enough to get that adrenaline rush. F45 is my current punishment of choice, along with a weekly tennis lesson and the occasional dose of yoga in an attempt to bring some tranquillity into my life.

Quiet is not something I find very often at home. Our four year old daughter and our three year old son keep my husband and me on our toes, running from one play date or extracurricular activity or children’s birthday party to the next, and refereeing the endless stream of “disagreements” that arise between the children at all waking hours.

When I have the time on the weekends, I love to bake and garden, now with both of the children – which, admittedly, makes these once peaceful pastimes slightly louder and more chaotic, but nonetheless just as fulfilling. I am also an avid reader, usually having four or five books on the go at any one time.

3. Tell us two fun facts about yourself I have had corrective surgery on both of my feet, in part, to address all the broken bones I suffered in my youth while dancing on pointe, preparing (pretending) for the day I would (naturally of course) be called up as the next prima ballerina of Canada.

I spent a few years working as a bartender, one summer working alongside the estranged birth mother of a famous Canadian singer and song writer, and another working at a high-end resort in Muskoka serving expensive liquor to off-season NHL players hoping to parlay their slap shot skills into a decent handicap for their golf game.

26 | The CLOser

Jeffrey Everhart

Senior Vice President – Fiduciary Services +1 302 440 3657 jeffrey.everhart@maples.com I joined the Maples Group in 2018 and work as a Senior Vice President in the Delaware office. I have over 14 years’ experience in US fiduciary services, working in the corporate trust industry and providing independent director / manager services, having previously worked at WSFS Institutional Services, Bank of America and Delaware Trust company. I have also worked on Delaware Statutory Trusts, asset-back securitisations, longevity products, and custody / escrow transactions.

1. How did you end up working at the Maples Group in Delaware?

After 13 years of providing corporate trustee administration services in Delaware, I was looking for a new challenge and opportunity. I had always admired the Maples Group culture and associates at various conferences and events, so I kept my eyes open for opportunities in the Delaware office.

When the opportunity arrived in 2018 to join the Structured Finance team, I knew it was the right moment. I couldn’t be happier since becoming part of Maples; I work with a wonderful team, and as I’ve gotten to know people better, I am even more impressed with the quality of individuals throughout the Maples Group.

2. What do you like to do outside of the office?

When I’m not running around with my teenage kids I enjoy going to movies, visiting Civil War battlefields and playing strategy board games. Recently I have been looking into purchasing a recreational vehicle and love going to RV shows looking for the perfect RV.

3. Tell us two fun facts about yourself.

I am a proud member of the Ponca Tribe of Nebraska and this past fall performed in my first musical at a local community theatre with my entire family.

February 2020 | 27

I had always admired the Maples Group culture and associates at various conferences and events, so I kept my eyes open for opportunities in the Delaware office.

A Global Team Our CLO team comprises 26 specialist CLO lawyers and 48 specialist CLO fiduciary professionals across our global network.

Since the inception of the CLO market over 20 years ago, we have provided our clients with the benefit of our unparalleled depth of knowledge, experience and insight into what we see across the whole structured finance market, from the latest warehousing structures, to the latest regulatory developments and how they impact CLOs,

to ongoing post-closing CLO issues.

For further information, please speak with your usual Maples Group contact, or the following primary CLO contacts:

Legal Services

Dublin

Fiduciary Services

Cayman Islands

Stephen McLoughlin +353 1 619 2736 stephen.mcloughlin@maples.com

Cayman Islands

Mark Matthews +1 345 814 5314 mark.matthews@maples.com Scott Macdonald +1 345 814 5317 scott.macdonald@maples.com Nicola Bashforth +1 345 814 5213 nicola.bashforth@maples.com John Dykstra +1 345 814 5530 john.dykstra@maples.com Tina Meigh +1 345 814 5242 tina.meigh@maples.com Jonathon Meloy +1 345 814 5412 jonathon.meloy@maples.com James Reeve +1 345 814 5129 james.reeve@maples.com Anthony Philp +1 345 814 5547 anthony.philp@maples.com Amanda Lazier +1 345 814 5570 amanda.lazier@maples.com

Callaghan Kennedy +353 1 619 2716 callaghan.kennedy@maples.com Hong Kong Stacey Overholt +852 3690 7441 stacey.overholt@maples.com Jersey Chris Byrne +44 1534 495 311 chris.byrne@maples.com London Jonathan Caulton +44 20 7466 1612 jonathan.caulton@maples.com Singapore Michael Gagie +65 6922 8402 michael.gagie@maples.com

Guy Major +1 345 814 5818 guy.major@maples.com Andrew Dean +1 345 814 5710 andrew.dean@maples.com Delaware James Lawler +1 302 340 9985 james.lawler@maples.com Dublin Stephen O’Donnell +353 1 697 3244 stephen.odonnell@maples.com Jersey Cleveland Stewart +44 1534 671 370 cleveland.stewart@maples.com London Sam Ellis +44 20 7466 1645 sam.ellis@maples.com Netherlands Jan Hendrik Siemssen +31 20 570 6820 janhendrik.siemssen@maples.com

Forthcoming Events Members of the Maples Group CLO team will be attending the following industry events during H1 2020:

23-26 February

SF Vegas 2020 Aria Resort Las Vegas, NV

12 March

The 2nd Annual Investors’ Conference on CRE CLOs Marriott New York Downtown New York, NY

1-2 June

The 9th Annual Investors’ Conference on CLOs & Leveraged Loans Sheraton New York Times Square New York, NY

16-18 June

Global ABS 2020 Centre Convencions Internacional Barcelona, Spain

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