Maples Group - The CLOser - December 2021

AN INDUSTRY NEWSLETTER FOR THE GLOBAL CLO MARKET DECEMBER 2021

Collateralised Fund Obligations US CLO Equity in Global Demand How Can Investors Maximise the Opportunity?

Long-Term Multi-Borrower Warehouses

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 CLOser1 includes:

2 7

US and European CLO Market Reviews Global Listings Update

8

Bringing You CLOser

10

Collateralised Fund Obligations

12

Mitigating Risks of Inadvertent 'Custody' Under the SEC Custody Rule

14

Long-Term Multi-Borrower Warehouses

16

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, Euronext Dublin and Central Bank of Ireland.

1

December 2021 | 1

What's Inside

The Maples Group is delighted to present our December 2021 edition of The CLOser.

In this edition: •

We discuss the demand for US CLO equity and how investors can maximise the opportunity in our third 'Bringing You CLOser…' feature with an inside view from Lakemore Partners.

•

We present our usual US and European market reviews.

•

We provide a global listings update.

•

We take a look at collateralised fund obligations.

•

We take note of the relevance of the SEC custody rule to CLO managers.

•

We reflect upon long-term multi-borrower warehouses. AND…

•

We get to know Associate Alicia Thompson at Maples and Calder, the Group's law firm, and Senior Vice President Luana Guilfoyle in the Group's fiduciary team, both based in the Cayman Islands.

We very much hope you enjoy this edition and find the content engaging and informative. We look forward to seeing you all in 2022!

Stay safe and best wishes from the Maples Group CLO Team

2 | The CLOser

US CLO Market Review Records Shattered: Unprecedented Volume and Activity as US CLO Market Continues to Thrive When we issued our last US CLO Market Review in May we noted that 2021 had, up until that point, seen a dramatically marked and continued improvement in CLO market conditions. Tightened spreads, increased institutional demand for credit, increased liquidity, reduced funding costs, positive effects of covenant-lite loans, confidence from the experience of 2020 and other factors had all contributed to a rapid and frenzied resumption of issuance composed of both new-issue transactions and refinancings / resets. Such heightened levels of activity continued on an upwards trajectory since May, and an all-time monthly high of US$26.39 billion was reached in November. By the end of Q3, 263 new issue deals had priced, totalling almost US$131 billion (as compared to 142 deals totalling US$61.78 billion by Q3 of 2020) – notably, average pricing has generally increased only slightly throughout the year, from around 114bp in Q1, 116bp in Q2 and 118bp in Q3, which are significantly below 2020 levels. As a consequence, before the beginning of Q4, we had already witnessed the most active year on record, with still three months left to run.

Around the time of publication of this edition of The CLOser, total new issuance stood at a whopping US$177 billion - a truly historic year, far exceeding the full-year primary issuance level of US$128.86 in 2018, being the previous most active year on record.

In addition to new issuance, this year has experienced an enormous record-breaking amount of reset and refinancing activity, with 247 CLOs resetting and 267 CLOs being refinanced thus far in 2021, representing a total value of over US$232 billion, again far surpassing prior records set in 2017 and 2018. Opportunity for spread reduction has been a key driver, although average reduction on the senior-most notes from a refinancing eased in Q3 to 26bp, down from 31bp in Q2 and 46bp in Q1. This translated into slightly fewer deals in Q3 as compared to earlier in the year.

Further underpinning the market performance and investor demand, it is notable that the number of open warehouses has increased significantly since our May review and, indeed, during H2 2021 in particular, the Maples Group frequently received (and continues to receive) instructions from the most active managers to form two or three SPVs at a time.

In addition to the above observations on general volume and activity, we summarise below one or two trends, developments and impacts on US CLOs noted by the Maples Group team throughout the last six months: •

Loan Tranches: There has been a noticeable uptick over the last couple of months in the number of senior AAA tranches being offered in loan format. Many new issue deals have sought to address investor interest in

December 2021 | 3

Investor demand and market conditions remain very favourable for the US CLO market to continue to thrive

this regard, with over 19 CLOs featuring loan tranches between September and October alone. We understand that loan tranches present more favourable capitalrisk treatment by banks and certain other institutional investors, but that a single institutional buyer, in particular, is largely responsible for the uptick this year as it seeks to complement its arranger business. The result is a shattered record, with total volume of loan tranches in 2021 vastly exceeding all prior years.

•

EU Securitisation Regulation Amendments: Many of our readers will be aware that, in April 2021, certain amendments to the EU Securitisation Regulation became effective resulting in a prohibition in the use of SPVs established in jurisdictions on the EU AML 'high-risk third country' list (the "EU AML List") – the Regulation originally prohibited the establishment of SPVs in jurisdictions on the Financial Action Task Force ("FATF") black list. Since the Cayman Islands is not on the EU AML List this was not immediately problematic for the utilisation of Cayman Islands SPVs in US CLOs. Understandably, however, it did give rise to concerns that EU investors may not be able to invest in securities offered by a Cayman Islands CLO issuer to the extent that the Cayman Islands were to be placed on the EU AML List in the future. Such possibility was something that had indeed been anticipated could occur in light of FATF's addition of the Cayman Islands, in February 2021, to its separate list of jurisdictions under increased monitoring (the so called 'grey list') due to perceived strategic deficiencies in the Cayman Islands AML regime that FATF had identified. During the course of 2021, the Maples Group has closely monitored developments and provided updates to managers and US counsel. The EU Delegated Act pursuant to

which it was anticipated that the Cayman Islands and other jurisdictions may be added to the EU AML List has still not been published despite indications that this could have happened as early as October 2021.

When, or indeed if, this will happen remains unclear and there has also been indication of a possible bifurcation of the EU AML List into a grey and a black list, which is anticipated to be further good news for the Cayman Islands. In the meantime, however, we are pleased to report that, in October 2021, the Cayman Islands was found to be compliant or largely compliant with all 40 FATF recommendations, which means the jurisdiction is at the forefront of all jurisdictions assessed so far on technical compliance with those 40 FATF recommendations. There is scope for cautious optimism and certainly we remain hopeful that any negative impacts of these developments, witnessed so far, will be short-lived. Of course, in light of this, offering document disclosures have included risk factors addressing the current position and the implications should the Cayman Islands be placed on the EU AML List and indentures have tended to include language that facilitates, rather than requires, a possible transfer in jurisdiction of the issuer should that be deemed necessary and desirable.

•

Multi-Borrower Warehouse Structures: Over the course of the past year, we have observed a significant increase in popularity of multi-borrower warehouse structures, typically involving a static warehouse parent borrower and subsidiary borrowers that are spun-off to become (or merge into) a CLO issuer. These structures are covered in a separate article that can be found on pages 14 - 15.

4 | The CLOser

•

•

•

ebut Managers: With the market performing so well, D it is no surprise to find a number of new managers coming to market and the Maples Group has been delighted to help many of those launch their debut deals in 2021. There have been six new managers in the main market in 2021 including Beach Point, CQS, Diameter Capital, Sancus Credit, Sycamore Tree and Tikehau.

L IBOR Transition: In our May edition of The CLOser, we provided a report on the LIBOR transition, which included an analysis of three distinct approaches that had emerged and the trends observed with respect to adoption. Six months later and the transition continues to cause some headaches for CLO managers, despite the wave of resets and refinancings that have afforded opportunity to include fall-back language in indentures.

For managers, we understand the principal concern is the risk of holding loans tied to a variety of short-term benchmarks, increasing potential for interest-rate volatility, which needs to be addressed by a transition that results in the least mismatches between assets and liabilities. It has been noted in market commentary, however, that some volatility in CLO pricing could help and that the transition may actually lead to a boost in the market in the shorter-term. In the meantime, we have started to see the first few deals with SOFR-linked notes price, with those set to issue in Q4.

CFOs: While the US CLO market has been red-hot, a potential new asset class in the form of collateralised fund obligations has started to emerge in the Cayman Islands. The Maples Group has received a couple of instructions on such structures and continues to monitor developments. Our current observations are covered in a separate article that can be found on pages 10 - 11.

Remainder of 2021 The final few weeks of 2021 look set to be busy - with a number of new issue deals, refinancings and resets currently scheduled to close as managers look to maximise LIBOR deals before the year is out - although impacts of general capacity and, in particular, transition to SOFR, we understand, may result in an overall slight slowdown towards the end of this period as compared to the frenzied activity that has been a feature of much of 2021.

Outlook for 2022 For the time being, investor demand and market conditions remain very favourable for the US CLO market to continue to thrive, notwithstanding uncertainties surrounding the LIBOR transition. We also note that there is a very large number of open warehouse and deals set to price in the new year; so a good start to 2022 is expected. Indeed, Morgan Stanley has projected continued elevated volumes of US CLO deal activity in 2022, including US$160 billion in new issue deals.

Although not quite as high as 2021, this would nonetheless beat all prior records and result in a prolonged period of exceptional performance. Despite other forecasters being considerably less bullish, general consensus is certainly that activity will remain higher than in previous years. Time to bolster the forces if you haven't already!

For further details, please contact:

Scott Macdonald

+1 345 814 5317 scott.macdonald@maples.com

James Reeve

+1 345 814 5129 james.reeve@maples.com

December 2021 | 5

European CLO Market Review 2021: A Year of Lockdowns, Refis and Resets In 2020, the European CLO market performed strongly notwithstanding the disruptions triggered by the global pandemic at the end of Q1. Issuance levels ramped up through to the end of the year closing out with 43 deals representing a total issuance of €22.11 billion, marginally trailing 2019.

The end of 2020 also marked the end of the Brexit transition period and after five years of negotiations following the Brexit referendum, the United Kingdom finally ceased to be a member state of the European Union. While Brexit gave rise to an initial flurry of activity relating to structural amendments to existing transactions, market participants waited to see if it would have a more far-reaching impact on the European CLO market.

Any concerns of a Brexit-driven market slump soon fell away as CLO transactions (both primary issuances as well as refinancing and resets) began at a feverish pace. The high level of activity proceeded unabated throughout the year resulting in the European CLO market reaching (as of the date of writing) an aggregate issuance level of €34.05 billion from 83 deals. This represented an increase of almost 79% compared with the 2020 YTD issuance of €19.03 billion from 57 deals.

These issuance levels were in part a result of record levels of refinancings and resets of existing CLOs (€10 to €15 billion) throughout the year. The resets and refinancings transactions themselves varied in their approach. For example, the refinancing of only certain tranches of existing notes, the introduction of loan tranches as well as the upsizing of transactions using newly established 'sidecar' warehouse SPVs.

6 | The CLOser

Outlook for 2022 The Year Ahead Market analysts who have, as of the date of writing, issued their predictions for 2022 have indicated that they do not expect the bumper level of year-on-year growth to be repeated in 2022. Nevertheless, the expectation is that 2022 could be comparable to 2021 with issuance levels of €30-€35 billion predicted. This is notwithstanding an anticipated fall off in levels of refinancing and reset activity due to fewer deals having exited their non-call period and therefore not being eligible to be refinanced or reset.

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

The Evolution of the Green CLO As regards to developments in the CLO market in 2022, as with many other markets, ESG is expected to be a key market influence as international investors' appetite for ESG-compliant products continues to grow.

'Green' CLOs have been present in the European CLO market over the last number of years. However, the original iterations of the green CLO were often limited to the inclusion of a negative covenant in eligibility criteria regarding the exclusion of obligors in certain industries, such as tobacco, firearms and fossil fuels.

Such negative screening approaches have been refined and developed by CLO managers over time. These efforts have most recently been supplemented by the issue of the ESG Exclusion Checklist for Business Activities by the European Leveraged Finance Association, which is designed specifically to allow CLO managers to easily screen investments based on ESG criteria.

The next stage in the evolution of the green CLO is becoming evident in a number of new deals moving beyond the negative screening eligibility criteria approach. There have been a number of managers moving to a 'positive screening' approach involving the inclusion of ESG portfolio profile tests.

The expectation is that 2022 could be comparable with 2021 issuance levels

December 2021 | 7

Global Listings Update Ireland

Cayman Islands

During the first half of 2021, 202 US and European CLOs, comprising new issuances, re-financings and resets, were listed on Euronext Dublin. Of these listings, 72 were by issuers domiciled in the Cayman Islands and 130 were Irish issuers.

Although 2021 is not yet behind us, it is clear that this will be a record-breaking year for CLO listings on the Cayman Islands Stock Exchange ("CSX"). To date, the 2021 volume of CLO listings on the CSX has exceeded 2020 volume, up by a whopping 77%. In 2020, 57 CLO issuers listed on the CSX (an increase from the 54 CLO issuers listed on the CSX in 2019).

In 2021, as of 15 November 2021, 101 CLOs, comprising new issuances, refinancings and resets, listed on the CSX. Of these 101 new listings, 96 (or 95%) were by Cayman Islands issuers with a Delaware co-issuer. The Maples Group listed 57% of all the CSX-listed CLOs and 59% of all the Cayman Islands issuers listed on the CSX during this period.

The Maples Group's Dublin office listed 38% of all Euronext Dublin listed CLOs and 62.5% of all Cayman Islands domiciled issuers listing on Euronext Dublin.

For further details, please contact:

Ciaran Cotter

+353 1 619 2033 ciaran.cotter@maples.com

Not surprisingly, and also reflective of the CLO market, June and October were the most active months for CSX CLO listings, with 15 new CLO listings in each of those months.

New issuance CLO listings outpaced refinancing and reset listings, with many refinanced deals delisting the redeemed notes and electing to forgo a listing of the replacement notes. However, refinancing and reset listings still accounted for 40% of the CSX CLO listing activity this year.

2021 saw an increase of Delaware issuers listing on the CSX, with at least four Delaware issuers listing at least one class of notes and, in most cases, all classes of secured notes, on the CSX. The listing of European CLO warehouse borrowers on the CSX was another trend on the rise in 2021, with at least four European CLOs listing PPNs or a single class of senior notes on the CSX during the warehouse stage.

This year has seen an unprecedented level of CLO listings on the CSX, truly ensconcing the CSX's place in the market as a practical and efficient option for CLO listings.

For further details, please contact:

Amanda Lazier

+1 345 814 5570 amanda.lazier@maples.com

8 | The CLOser

Bringing You CLOser It is with great pleasure and privilege that we present our third Bringing you CLOser… with an inside view from recognised CLO industry experts. In this roundtable discussion article, James Reeve speaks with Mohamed Seif and Dan Norman of Lakemore Partners, a leading private credit investment firm primarily investing in control CLO equity on behalf of global investors, about the global demand in CLO equity, investment strategies, analysis, qualitative and quantitative benefits in supermajority equity positions and strategic investormanager partnership, together with market review and forecasts for 2022.

INSID N A , E ABL T D N U XPER O E R Y R O L T C INDUS O L C De Global FROM h g i H g ctin or tu a p y Is Attr imise the Op t i u q E x O a L rs M US C Investo n a C w Ho r 2021

be Decem

Click here to view the roundtable.

DE VIEW RTS

– emand unit y ?

December 2021 | 9

10 | The CLOser

Collateralised Fund Obligations While the US CLO market powers to new heights in 2021, a less prolific, but nonetheless highly interesting structured finance market segment, continues to attract attention.

Collateralised Fund Obligations ("CFOs"), which securitise interests in a diversified portfolio of private equity and hedge fund assets, share many of the hallmarks of a traditional CLO structure, while incorporating certain novel features to account for the unique nature of the collateral.

As with a CLO, tranched securities are issued by an SPV, typically with senior and subordinated notes reflecting different degrees of risk in the structure. The principle of bankruptcy remoteness is applied to the SPV, affording the necessary protections to investors and are considered 'offbalance sheet' deals. For the holders of these underlying fund interests, the CFO provides for a highly efficient means of financing, backed by long-term relatively illiquid assets that may not yet have realised their potential value.

Of primary note with regard to the CFO structure is the absence of traditional, predictable cash flows, where receivables such as loan or lease payments are predetermined and mapped out in terms of timing and appropriation towards interest and principal. With private equity and hedge fund interests in the securitisation pool, the payments generated by the structure will depend solely upon the success of the investments made by the underlying funds and effectively on the decisions taken by

the managers running them. In the case of private equity assets, the fund would have to exit a particular investment, either through a trade sale or IPO of a portfolio company, in order to generate the liquidity event that would then release proceeds to the underlying fund.

With ongoing capital commitments and collateral subject to the risk factors relating to the performance of the underlying funds, certain structural features are incorporated within CFOs to provide credit support. Significantly, a liquidity facility will typically be utilised in order to cover expenses on interest and capital call shortfalls, although cash flow will increase over time as distributions kick in. This facility will be put in place on closing so that the issuer can fund capital calls as and when they come in, with lenders committing to making advances to the issuer at the CFO level on a revolving basis, rather than having to collect all the cash up front.

December 2021 | 11

Unpredictable cash distributions can also be assuaged through a reserve account which accumulates a targeted amount until the scheduled call date, while sequential pay waterfalls and LTV triggers can turn off equity distributions once a predetermined threshold is reached. Furthermore, a mechanism may be included in the indenture for the issuer to issue further notes as required.

With one or two new CFO transactions coming through each year during the second half of the past decade, the deals have become more sophisticated over time and this development has enabled rating agencies a better perspective on how to judge the performance of active CFOs in the market.

Among the key issues related to ratings and credit consideration for private equity CFOs, S&P cites the expertise of the CFO manager, alongside the diversity of the underlying funds and their vintage, which determines when the investment period started. Particulars of any liquidity facility are also fundamental to this analysis, in addition to the credit quality of the liquidity facility providers.

By simulating the underlying path of cash flows under various scenarios, rating agencies are able to appreciate how deals will perform under stress and gauge their ability to meet the CFO's obligations, according to the priority of payments. From a fiduciary standpoint, the manager's valuation policies, which may be quite subjective, will want some rigorous examination, while the outlook for exits in particular sectors will offer guidance regarding potential cash distributions down the line.

The initial fallout and swift recovery from COVID-19 has also provided an opportunity to assess the recent performance of private equity CFOs. Fitch Ratings said that cash flows and LTV measures on the deals it covers have generally returned to pre-pandemic levels. Distributions from underlying private equity funds gained strong momentum through the second half of 2020, with increased exit activity in the IT and healthcare sectors, as well as the energy sector which had been hit hard by the pandemic.

Elsewhere, the spike in capital calls on private equity CFOs has dropped back to pre-pandemic levels, with less support needed for portfolio companies as markets stabilised.

Assuming normal conditions, private equity capital calls should decline over time, Fitch said, as underlying funds mature and investment periods expire.

From an investor standpoint, the benefits really centre around portfolio diversification. The CFO provides an opportune mechanism for investors to gain exposure to a broad cross-section of alternative assets, without the high minimum investment typically associated with hedge and private equity funds, as well as the ability to match a desired liability profile or rating. With the positive performance of underlying funds, success for investors will continue to be determined by managers and their ability to execute in an environment of high levels of dry powder and potential future volatility. While overall deal frequency currently remains low compared to the frenetic activity elsewhere in structured finance at present, we are seeing more CFO transactions and it remains an area to closely watch.

For further details, please contact:

Karen Perkins

+1 345 814 5768 karen.perkins@maples.com

James Reeve

+1 345 814 5129 james.reeve@maples.com

12 | The CLOser

Mitigating Risks of Inadvertent 'Custody' Under the SEC Custody Rule

December 2021 | 13

As many readers of The CLOser will be aware, the US Investment Advisers Act of 1940 (the "Act") makes it unlawful under Rule 206(4)-2 (the "Custody Rule") for an investment adviser to have custody of client funds or securities unless certain requirements are met. Over the years since the Custody Rule's introduction in 1962, it has been subject to various amendments, notably in 2003 and 2009, aimed at clarifying its scope, bringing it into line with modern practices and strengthening controls and safeguards in response to scandals such as the Bernie Madoff's Ponzi scheme. Some of the consequences of those amendments included a reintroduction of annual surprise verifications by the SEC and modification of the circumstances in which custody through an affiliate of the adviser can arise.

Since the Madoff scandal, we understand the SEC has given significant attention and priority to identification of potential breaches of the Custody Rule through their examination and verification processes and that application and interpretation of the Custody Rule continues to evolve.

This has led CLO managers to focus on how to mitigate against the risks of inadvertently acquiring 'custody' of CLO assets through updates to CLO documentation and practical steps, in light of SEC examiner advice. We note, in particular, that where a CLO manager has the ability to 'direct' disbursements of cash from a CLO issuer's accounts this may, of itself, be sufficient to cause a manager to have custody of the CLO’s assets for purposes of the Act in circumstances where that was neither intended nor reflective of the position in practice. Such a finding for a CLO manager could, of course, lead to a host of regulatory issues and requirements that managers are often not set up to handle.

Over the last couple of years, the Maples Group has engaged with various US counsel to help address these issues by advising CLO issuers on proposed modifications to language in management agreements and account control agreements, in particular, that help to address manager concerns with applicability and scope of the Custody Rule, in addition to implementation of related practical steps and processes.

If anyone should wish to discuss the Maples Group's experience in working with US counsel and CLO issuers to mitigate against a manager's inadvertent custody of assets under the Custody Rule please contact:

James Reeve

+1 345 814 5129 james.reeve@maples.com

Long-Term Multi-Borrower Warehouses This year, we have seen an increased appetite among managers for establishing a longer-term warehouse facility structured to fund the ramp up of multiple CLOs during its lifetime. Managers use the warehouse period to open a line of credit with the arranging bank to begin to acquire the loans that will ultimately form the CLO collateral portfolio. For the vast majority of CLOs, the typical warehouse period lasts from three to six months and involves a single borrower; namely the securitisation SPV, which will become the eventual CLO issuer. In the traditional warehouse structure, the warehouse facility is repaid at the CLO transaction closing from the proceeds of the issued CLO notes and the line of credit is terminated.

In the second half of 2020, however, we saw the first managers and arrangers explore the concept of structuring a long-term multi-borrower warehouse facility intended to finance the collateral acquisition of several eventual CLO issuers consecutively – with the facility remaining open for the next borrower as the preceding one moves to a successful CLO transaction closing. In 2021, this concept has gained momentum. Those long-term warehouses we saw established in 2020 are still going. By now, they have successfully ramped-up the portfolio of at least one CLO issuer and are well onto their second or third warehouse borrower housed under the same financing arrangement.

Indeed, several additional managers have entered the fray this year to establish their own long-term multi-borrower warehouse facility.

In our experience, these facilities tend to be structured in one of three ways.

Borrower Subsidiary Structure Thus far, the most popular approach is the borrowersubsidiary structure. In this structure, a new SPV is established as the primary borrower under the warehouse

for the life of the facility. A second new SPV is then established and is structured to be a direct wholly-owned subsidiary of the primary borrower SPV. During the rampup phase, the assets are generally accumulated with the subsidiary SPV. Either on the pricing date or simultaneously with the CLO closing, the subsidiary will break away from the primary borrower, i.e. its ordinary shares will be transferred from the primary borrower SPV to a share trustee to be held pursuant to the terms of a declaration of trust. Then, the subsidiary SPV will either be re-named as the CLO issuer, or it will merge with and into the CLO issuer. While the subsidiary SPV's obligations will be repaid by the resulting CLO, the warehouse line of credit will remain open with the primary borrower SPV. Following the take-out of the subsidiary SPV, a new SPV will be established as a subsidiary of the primary borrower, and the new subsidiary SPV will join the warehouse facility in order to begin to acquire its collateral portfolio. The process detailed above would then be repeated for this second subsidiary SPV, with it too eventually being taken out of the warehouse to move to its CLO transaction closing. Essentially then, for each new CLO issuer, a separate subsidiary will be established to join the existing warehouse facility in order to ramp-up the collateral for the next CLO.

May 2021 | 15

Of note, if the take-out of the subsidiary SPV occurs in connection with pricing (as opposed to occurring concurrently with the CLO close), post-pricing financing would likely need to be put in place to continue to facilitate the acquisition of loans in the runway up to CLO transaction closing. In this structure, ideally, the documentation for the post-pricing financing of the take-out subsidiary would be agreed to up-front alongside the negotiations for the long-term warehouse documentation, so as to remove any uncertainty around the availability of such financing and facilitate a quick turnaround time to open such a pricing to CLO close short-term warehouse.

Co-Borrower Arrangement Similar to the borrower-subsidiary structure discussed above is that of the co-borrower arrangement. Here, the second SPV is not a subsidiary of the primary borrower SPV, but is a stand-alone SPV and is brought into the warehouse facility as a co-borrower. While the second SPV co-borrower is party to this arrangement, most, if not all, of the loans accumulated will be assigned to it. At the time of take-out, the second SPV co-borrower will be released from the loan documentation and will either be re-named as the CLO issuer to proceed to a CLO transaction closing, or it will merge with and into the CLO issuer. Although the co-borrower is released from the warehouse, the warehouse remains open and is amended to permit the joining of a new co-borrower, with the above process repeating itself for this co-borrower.

Assignment of Traditional Single Borrower Structure Finally, a third approach we have seen to the longer-term warehouse facility has been to retain the more traditional single borrower structure in the loan documentation, but then, just prior to CLO transaction closing, rather than terminating the warehouse, the single borrower will assign all of its rights and obligations under the facility to a newly formed SPV warehouse borrower. The obligations of the first borrower will be repaid and it will be released from the warehouse facility to proceed to CLO closing. However, the warehouse will remain open with the lending arrangement continuing with the new, second warehouse borrower, until it too is sufficiently ramped-up to move to pricing and CLO close. The process can then repeat itself for a third warehouse borrower, and so on.

While the long-term multi-borrower warehouse structure is still in a nascent stage, as more arrangers consider the viability of this alternative lending platform, and as more managers recognise the potential economies of scale, we will undoubtedly see more iterations of and variations on this financing arrangement.

For further details, please contact:

Amanda Lazier

+1 345 814 5570 amanda.lazier@maples.com

16 | The CLOser

Your Global CLO Team – A CLOser Look Alicia Thompson

Associate | Legal Services | Cayman Islands +1 345 814 5479 alicia.thompson@maples.com

I am an associate in the firm's Cayman Islands office, specialising in structured finance transactions, banking, fund financing, aircraft financing, repackagings and CSX listings.

What did you do before working at the Maples Group?

Prior to starting my career with the Maples Group, I was a student living young and free with a hint of responsibility. I spent a few months interning in the real estate department at an Irish law firm in Dublin. When I was not behind my desk, I was trekking the Cliffs of Moher hoping not to get blown away. The Guinness Storehouse was a popular request by my friends who visited so I made several trips there and downed a few pints of free beer (who was I kidding about the latter? I was no experienced Guinness drinker!). A few weekend trips were sprinkled in to see some familiar faces in Manchester, England, which was where I completed the Legal Practice Course immediately prior to my stint in Dublin.

Have there been any silver linings for you in the global COVID pandemic?

Hindsight really is 20/20. I remember flying back to Grand Cayman from Miami on 1 March 2020 and thinking "Hmm, we will get over this in a few months". Boom! Three days later, our borders were closed and a few days after that, we were forming lines outside of supermarkets only on specific days according to your last name, working from home and replacing regular trips to my mom's house with FaceTime calls as we were not allowed to mix with other households.

Talk about scary and unprecedented … much like a scene from a movie! Fast forward 18 months and the COVID-19 pandemic has been one of the best things that has happened to me. The reminder of life's fragility heightened my appreciation for life and the importance of living in the present. Though work only slowed down for a few days

(many would beg to differ), I was forced to slow down and had nothing but time with myself. This time has been used to hone my physical, spiritual and mental health. With the flexibility resulting from the ability to work from home, I have been able to use the time I'd usually spend commuting in traffic to the office to instead train at the gym before starting my work day. Heightened use of technology has also afforded me the opportunity to attend therapy sessions via Zoom in the comfort of my home. Much of my personal experiences during COVID was beneficial, but my heart does go out to the many lives impacted negatively.

Tell us two fun facts about yourself.

I am very big on giving back to the community as I think that if I can touch or have an impact on even just one life then my deeper purpose on earth is completed. Close to the start of each academic year, I can be found sifting through the biography of students nominated for the Alicia Thompson Award sponsored by the Maples Group and awarded annually to one student of a local primary school who is excelling academically while also balancing community work and sports. The award consists of a monetary gift certificate for a school supplies vendor, a take-home plaque and a perpetual with the recipient's name displayed in the lobby of Maples and Calder.

On the other side of the coin, I've always been a fitness enthusiast and have dipped and dabbled in power lifting, but something about the 2021 Drug Free Athletes Coalition competition sparked my bodybuilding interests and I now aspire to compete one day. Not exactly sure how training and dieting will go with my busy work schedule!

December 2021 | 17

Alicia Thompson

Associate | Legal Services

18 | The CLOser

Luana Guilfoyle

Senior Vice President | Fiduciary Services

December 2021 | 19

Luana Guilfoyle

Senior Vice President | Fiduciary Services | Cayman Islands +1 345 814 5853 luana.guilfoyle@maples.com

I provide fiduciary services to a wide range of structured finance products, in particular CLOs / CDOs, structured note issues and asset financings.

What did you do before working at the Maples Group?

As soon as I obtained my Chartered Accountant designation, I knew that I wanted to move away from the bitter Canadian cold. My first stop was the British Virgin Islands where I continued my auditing career until I got the itch to move again and took a fund administration role in the Cayman Islands. Compared to the BVI, Grand Cayman seemed exactly that, "grand!", so I decided to try it out for 'a year'.

That was 16 years ago now. After moving out of fund administration, I spent the next 11 years as a fund fiduciary before joining the structured finance fiduciary team at the Maples Group three years ago.

What do you like to do in your spare time?

What spare time!? I have two very active young kids with social calendars far more interesting than my own, who strive to keep me young. When I'm not busy trying to help my son master the art of potty training or attempting to explain the newest method of long division to my daughter, I'm thankful to be living in paradise where we can spend our days in 85 degree weather year round.

If you could transport yourself anywhere right now where would you go, with whom and why?

Romania. I was born there in the mid-seventies and was about to take a long-awaited trip with family last summer before COVID shut us down. Having escaped communism at the age of 12, thanks to the unparalleled bravery of my parents, I was thrilled to be taking my children to visit the 'motherland' for the first time. As soon as we regain some normalcy with travel, I plan to resume our Romanian itinerary.

Tell us two fun facts about yourself.

Determined to give my parents a break and make it on my own, I held three jobs through high school and university in Canada. I entered the workforce serving the famous A&W root beer and fries. To this day, the delicious aroma of crispy A&W fries takes me back to those carefree days when I had endless energy and calories were not in my vocabulary.

Then, I became a video store clerk where I rented out Blockbuster movies back in the days of VHS tapes and that small back room where no one dared to enter! Lastly, I bagged groceries at the Safeway next to my university and was in a short time promoted to cashier, which was one of the first rewarding career moments of my late teens and very early twenties, since those positions were hard to come by for students of my age.

I spent the millennium in Brazil, escaping to Florianopolis from Edmonton's minus 40 degree Celsius winter, and I was so grateful to feel the warm sun on my face. Unfortunately, in my excitement, I failed to apply sunscreen on a mid-ocean fishing excursion, which left me with third-degree sunburns.

The local medics administered a thick layer of 'spray skin', which resulted in a bright white un-removable paste on my face for the rest of the trip. I still enjoyed one of the best New Year's Eve celebrations, where an 'all-white' ensemble is customary attire to ward off bad spirits, which I easily accomplished with my new complexion!

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

Fiduciary Services

Cayman Islands

Dublin

Cayman Islands

Scott Macdonald +1 345 814 5317 scott.macdonald@maples.com

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

Guy Major +1 345 814 5818 guy.major@maples.com

James Reeve +1 345 814 5129 james.reeve@maples.com

Callaghan Kennedy +353 1 619 2716 callaghan.kennedy@maples.com

Cleveland Stewart +1 345 814 6624 cleveland.stewart@maples.com

John Dykstra +1 345 814 5530 john.dykstra@maples.com

Andrew Quinn +353 1 619 2038 andrew.quinn@maples.com

Delaware

Tina Meigh +1 345 814 5242 tina.meigh@maples.com

Hong Kong / Singapore

Jonathon Meloy +1 345 814 5412 jonathon.meloy@maples.com Anthony Philp +1 345 814 5547 anthony.philp@maples.com Amanda Lazier +1 345 814 5570 amanda.lazier@maples.com

Michael Gagie +65 6922 8402 michael.gagie@maples.com

James Lawler +1 302 340 9985 james.lawler@maples.com Dublin Stephen O’Donnell +353 1 697 3244 stephen.odonnell@maples.com

Jersey

Jersey

Chris Byrne +44 1534 495 311 chris.byrne@maples.com

Robert Lucas +44 1534 671 371 robert.lucas@maples.com

London

London

Jonathan Caulton +44 20 7466 1612 jonathan.caulton@maples.com

Sam Ellis +44 20 7466 1645 sam.ellis@maples.com

Luxembourg Arnaud Arrecgros +352 28 55 12 41 arnaud.arrecgros@maples.com

Netherlands Allard Elema +31 203 998 233 allard.elema@maples.com

maples.com