Maples Group - The CLOser, October 2022

The 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: US CLO Market Review

European CLO Market Review

Governance Perspectives for a Modern Approach to Risk Retention

Global Listings Update

Data

What's Inside

The Maples Group is delighted to present our October 2022 edition of The CLOser.

In this edition we:

• Bring you key market updates from our US and European CLO markets and discuss the Cayman Islands EU AML listing;

• Celebrate the Irish Debt Securities Association's 10th anniversary;

• Speak to the Cayman Islands Stock Exchange to learn about their new market segment for ESG investments; and

• Get to know Associate Renee Lindo at Maples and Calder, the Group's law firm; and Senior Vice President Sam Ellis in the Group's fiduciary team.

We very much hope you enjoy this edition and find the content engaging and informative. We look forward to seeing you at the IMN and Opal CLO conferences!

Best wishes from the Maples Group CLO Team.

Adaptability and Resilience Hold True, But Volatility and Economic Uncertainties Constrain Market

With the incredible level of new issuance volume and refinancing and reset activity seen in 2021, it would be easy to quickly reflect on the US CLO market year-to-date and feel somewhat deflated. Of course, 2021 was an unprecedented year resulting from a truly unique combination of circumstances, in large part driven by the impacts of the pandemic throughout 2020 and a sense of emergence and resumption of business in a 'new normal'. The resilience of the US CLO market was the overarching theme – and certainly one of the fundamental conclusions the Maples Group reached through our own analyses of the impacts of the pandemic on CLO warehouse performance2. Recognition of that resilience was supported by strong investor demand that at times resulted in frenzied activity leading to simple capacity issues as the rate and volume determining factor.

Although conditions remained favourable towards the end of 2021, the market did come up for air as focus shifted to LIBOR cessation and the SOFR alternative3 . Nonetheless

Morgan Stanley, for example, projected continued elevated volumes through 2022, including US$160 billion in new issue deals and the year did generally get off to a positive (if not comparatively slow) start, with the Maples Group having the privilege of acting on all of the new SOFR US CLOs to price during the first month of 2022. As can be seen from Figure 1 below, first quarter new issuance volume ended up at US$31.18 billion, representing a 22% reduction based on Q1 of 2021 but notably up on 2019 levels – and comparable to 2018 levels – for that same quarter.

Figure 1: 5-Year US CLO New Issuance Volume by Quarter

At the end of Q1, on 13 March to be precise, the Cayman Islands was formally added to the EU AML list, thereby restricting the "establishment" of new Cayman Islands 'SSPEs' for purposes of the EU Securitisation Regulation on or after that date and being relevant in the context of deals facing EU regulated investors and CLOs structured as EU risk retention compliant. The Maples Group anticipated and tracked this eventuality many months in advance and kept clients and counsel updated as to potential impacts on the US CLO market, alternative jurisdictions for SPVs and our proposed solutions. This proactive approach and market leading position largely helped our global CLO team

to mitigate against those impacts and enable a smooth transition where alternative jurisdictions to the Cayman Islands became necessary, while still maintaining existing deal teams, knowledge, experience and relationships through partnership with our CLO specialists in other offices. Indeed, the swift and smooth adjustment helped contribute towards a strong Q2 notwithstanding heightened macroeconomic concerns, recessionary fears and market uncertainty and volatility associated with the war in Ukraine, which had commenced at the end of February. The result was new issuance for Q2 of US$41.61 billion, a mere US$1.8 billion short of Q2 2021 and significantly above pre-pandemic levels of Q2 2018 and Q2 2019. Such trend in terms of matching or beating pre-pandemic levels continued into Q3 with new issuance of US$33.09 billion, higher than both 2018 and 2019, although a good 30% down based on Q3 2021. Faced with a very challenging backdrop of circumstances, these levels of activity in 2022 further underpin the resilience of the US CLO market exhibited by the pandemic experience.

One of the notable issues that has stymied more prolific issuance in 2022 has been availability and appetite of AAA investors, which is likely reflected in the comparably smaller manager count of 93 YTD, being the lowest we have witnessed over a five-year period (see Figure 2). Quite a number of managers have commented about the difficulties of successfully bringing deals to market due to AAA investor competition, confidence and appetite in light of the prevailing economic climate. Relatedly, it is worth noting that average new issuance deal size has also been at its lowest level for the last five years (factoring out 2020) at around US$466.4 million; the figures for 2018, 2019 and 2021 being respectively US$534.7 million, US$479.6 million and US$493.6 million.

Figure 2: 5-Year US CLO New Issuance Volume, Deal Count and Manager Count

Despite the relatively healthy pre-pandemic levels of new issuance in 2022 discussed above, increases in cost of funding and other factors, many of which are touched on above, have essentially precluded the viability of refinancing or resetting any deals. This is demonstrated starkly and dramatically in the YTD figures, with refinancings at an all-time low of US$4.77 billion from 12 deals (95% down on 2021) and resets amounting to US$19.57 billion from 34 deals (82% down on 2021, but approximately the same as 2018) – see Figures 3 and 4 below. Lacking a significant improvement in market conditions, there are little signs of this changing in the immediate term but should conditions alter favourably there will be a large number of potential candidates from deals closed over the last year or two that may lead to somewhat of a wave, the likes of which we saw in 2021.

Figure 3: 5-Year US CLO Refinancing Volume and Deal Count

In addition to the above observations on general volume and activity across the US CLO market as a whole, we discuss below additional trends and developments based on deals the Maples Group CLO team has acted on throughout 2022, year-to-date:

EU Securitisation Regulation and Cayman's EU AML Listing

In our last edition of The CLOser4, we noted that amendments to the EU Securitisation Regulation on 9 April 2021 resulted in the existing prohibition on the use of SPVs established in jurisdictions on the Financial Action Task Force (FATF) 'black list', under Article 4, being changed instead to refer to SPVs established in jurisdictions on the EU AML "high-risk third country" list (the "EU AML List"). The Cayman Islands has, of course, never been (and would never expect to be) on FATF's black list, but FATF had already added the Cayman Islands in February 2021 to its separate list of jurisdictions under increased monitoring due to perceived strategic deficiencies in the Cayman Islands AML regime. As anticipated in light of that – and the April 2021 amendments – the EU proceeded to add the Cayman Islands to the EU AML List on 13 March this year, thereby triggering the application of the Article 4 prohibition. This act by the EU prevented the "establishment" of new Cayman Islands SSPEs, for purposes of the EU Securitisation Regulation, on or after that date. It did not require EU investors holding securities issued before that date by an existing Cayman Islands SSPE to sell or transfer such securities. And while a refinancing or reset of an existing Cayman Islands SSPE was not necessarily considered a new "establishment" of a Cayman Islands SSPE, EU investors adopted a cautious stance from the outset (particularly with regard to a reset), requiring the Cayman Islands SSPE issuer to be migrated to an alternative jurisdiction not featuring on the EU AML List5

The market relatively quickly coalesced on Jersey as the preferred alternative to the Cayman Islands. This was anticipated since Jersey was already an established jurisdiction for CLOs, which mitigated against the risks of rating agencies grappling with the change. Jersey is also a well-established and highly regarded jurisdiction with good comparability of laws and regulations, which helped limit the extent of adaption required to deal documentation.

Although Bermuda also emerged as one of the other alternatives to the Cayman Islands, it has not witnessed the same level of volume and interest as Jersey. This may, in part, be related to the fact that the EU had added Bermuda to its Annex II list of non-cooperative jurisdictions for tax on 24 February 2022. Although that did not prohibit the use of Bermuda SPVs for EU risk retention compliant deals, under Article 4 of the EU Securitisation Regulation, it did become

necessary, while Bermuda was listed, for an EU investor to notify the tax authorities in its home state of any investment in a Bermuda SPV. Such Annex II listing ceased on 4 October 2022.

Figure 5 below illustrates the Maples Group's trend of issuer SPV jurisdictional split with respect of US CLO closings on which we have acted in 2022, through to September.

Figure 5: CLO Closings by SPV Jurisdiction

CLO CLOSINGS BY SPV JURISDICTION

At present, we are trending towards an average of 51% Cayman SPVs and 49% Jersey SPVs for closed CLOs; notably we have not been instructed to use any other jurisdiction. For the Maples Group, the number of CLO closings with a Jersey SPV peaked in June and, as can be seen from Figure 6 below, migrations also peaked in June but since then, the number of existing Cayman Islands SPVs needing to be migrated has broadly tended to decrease over time with the inevitable increase in instructions to incorporate Jersey SPVs for new warehouses and CLO transactions from the outset. The peak observed in June is consistent with the increased yields during H1 2022 and reports that BBB- and BB-rated CLOs yielded 8.1% and 12.6% respectively as of June 30, compared to 4.9% and 8.5% at the end of 20216

Figure 6: Monthly Incorporations and Migrations to Jersey

MONTHLY INCORPORATIONS AND MIGRATIONS TO JERSEY

the EU Securitisation Regulation: UK regulated

Securitisation Regulation continues

Warehouses: Duration, Number Open and Jurisdictional Split

One of the trends that the Maples Group is closely monitoring and intends to report on later this year is warehouse performance. Similar to our quantitative and qualitative analyses of warehouse performance in light of the pandemic, we are shifting attention to the growing number of open warehouses and warehouse duration, which seem to be a potential indicator of challenges ahead due to macroeconomic conditions and global uncertainties. We have already observed one or two consolidations of warehouse lines, static deals and splits of assets and aim to report more substantively on those developments in due course towards the end of the year. In the meantime, we wanted to share with our readers the data in Figures 7, 8 and 9 below, which illustrate the following:

• Average warehouse duration for successfully closed CLOs dropped during July and August but increased again during September to around 180 days.

• Average warehouse duration for open warehouses is a good 30% higher than for the closed CLOs at around six months, although this does represent a decrease by around 37% from January through to September. It has, however, been reported that nearly 40% of warehouses across the US CLO market are nine months or older.

• The total number of open warehouses has been on a steady upwards trajectory since the beginning of 2022, though there may be some early signs of levelling off in September. Unfortunately, we do not have a wealth of historic warehouse data from prior years with which to compare, save that we can observe the current number is around 20% higher than the number of open warehouses on our book at the beginning of the pandemic in 2020. It is also notable that the increase from January through to September is around 265%. Such growth is very marked indeed and it will be interesting to track how that figure changes through the remainder of 2022 and beyond.

Figure 7: CLO Closings and Average Warehouse Age

Figure 8: Total Open Warehouses and Average Age

Figure 9: Warehouse Split by Jurisdiction

Figure 10: Closed CLOs by Manager

Loan Tranches

Through 2022, there has been a steady uptick in the number of senior AAA tranches being offered in loan format. Many new issue deals have sought to address investor interest in this regard, with around 15% of closed CLOs with the Maples Group featuring loan tranches yearto-date. We understand that loan tranches present more favourable capital-risk treatment by banks and certain other institutional investors.

Remainder of 2022 Activity

Given global instability, growing recessionary fears, rising interest rates and general market volatility it is difficult to predict what the future may hold for the US CLO market. That said, we opened this review with a positive observation that data over the last five years indicates 2022 is, in certain respects, comparable to pre-pandemic levels, at least in terms of new issuance volume. Should the market remain steady on that current trajectory it does not appear unrealistic that 2022 will equal or surpass 2018 and 2019, in line with predictions in that regard made earlier in the year. There is little to no indication, however, that refinancing and reset activity will pick up before the year is out.

EU AML Listing – Possible de-listing

At FATF's last plenary in June, FATF recognised the Cayman Islands' ongoing efforts and was satisfied that one of the three recommendations had been largely addressed. The Cayman Islands has also been making significant progress with its final two outstanding FATF outcomes being: (i) effective beneficial ownership sanctions; and (ii) demonstrating that the country is effectively prosecuting breaches of the Cayman Islands' AML regime. As a result, we are cautiously optimistic that the Cayman Islands may be removed from the FATF grey list later in October 2022, following the next FATF plenary session. If so, we would then anticipate removal from the EU AML List when that is next updated by the EU in Q1 of 2023.

Outlook for 2023

As we look to 2023, we hope to see the Cayman Islands removal from the EU AML List and the need for temporary use of alternative jurisdictions for SSPEs to fall away. Should that not be the case, however, our experiences and handling of the situation in 2022 has provided effective and efficient alternative solutions while efforts to secure a delisting are ongoing.

The real challenges we see ahead for 2023 revolve around the ramifications of global economic instability, particularly rising interests rates to combat recessionary fears and the potential for liquidity issues, rating downgrades and defaults, particularly in sectors where leverage is already high, such as technology. Warnings have already been raised that corporate loans rated single-B-minus by S&P Global Ratings now make up nearly 30% of CLO holdings, the highest level since the 2008 credit crisis, according to research by Barclays Plc. If ratings of a fraction of those loans fall one notch to triple-C, they risk triggering credit rating limits on CLOs and dragging down prices of CLO securities.

On a positive note, however, new managers continue to show interest in coming to market and some existing managers have made strategic hires with a view to developing and expanding their CLO platforms. We also continue to see a steady stream of new warehouses being opened and look forward to updating our readers on warehouse activity and outlook for 2023 later this year.

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

European CLO Market Review

2022 - Thus Far

As predicted by most analysts in the early part of the year, the remarkable level of activity in the European CLO market seen in 2021 has not continued into 2022. Clearly, 2021 was a banner year for new issuances but particularly on resets / refinancings which resulted from the short call periods of the 2020 vintage, as well as 2019 deals rolling into their call period combined with attractive spreads and market conditions. Those structural conditions were not going to persist, so a decrease in 2022 issuance levels was expected and weaker performance has been further compounded by macro and geopolitical events this year.

Nevertheless, activity levels have remained steady and comparable to pre-pandemic levels. There have been 50 new 2022 deals year-to-date representing €20.64 billion. The market has also seen five new-issue European CLOs printing in August, the largest volume and number of deals for August in the European CLO 2.0 era.

Notwithstanding the challenging backdrop, the CLO product has continued to show its adaptable and innovative nature to continue to bring deals to market. For example, an interesting feature used by a number of managers on European CLOs this year is to issue a delayed draw single-B tranche as part of a new issue. The delayed draw tranche effectively acts as a placeholder for a future refinancing.

This solution will already be familiar to US CLO market players as a common feature in the US market. Managers have also used mechanisms such as varying non-call and reinvestment structures and innovations at the top and bottom of the capital stack in order to make CLOs more appealing to investors.

Notwithstanding the challenging backdrop, the CLO product has continued to show its adaptable and innovative nature to continue to bring deals to market

Another recent trend in European CLOs, also adopted from the US market, is the incorporation of 'anti-priming language' into documentation in order to give managers further flexibility in restructuring and to prevent rival creditors from cutting CLOs out of favourable distressed debt exchanges. The formula made its first appearance this side of the pond on Bain Capital Euro CLO 2022-2 and has since appeared in a number of other European CLOs. Market commentators have noted the incorporation of this language has been driven by managers aiming to put themselves in the strongest position possible with the brewing energy crisis in Europe.

Last year also saw the introduction of 'loss mitigation obligations' language which allows managers to acquire new obligations in connection with a default or restructuring of an existing obligation. We also continue to see the evolution towards green CLO products (e.g. so-called Article 8 aligned deals and the adoption of ever-more enhanced manager ESG matrixes and methodologies).

2022 – Looking Ahead

Market analysts who have, as of the date of writing, issued predictions for the final quarter of 2022 are cautiously optimistic with an expectation 2022 could be comparable with pre-pandemic issuance levels of €25–30 billion. Analysts have cited the increase in deals moving towards pricing as an indication of future deal flow, while also noting the recent rise in loan prices should enable existing warehouses to ramp up. From our market perspective, the manager focus is still weighted towards getting existing warehouses priced rather than opening new ones albeit we are also seeing innovations in the types of warehouse funding lines being opened.

Finally, on October 10 the European Commission finally published its eagerly anticipated "Article 46" report examining certain mandated questions as well as the general functioning of the EU Securitisation Regulation to date. While the market is still digesting the report, the initial EU industry reaction is positive overall. For example, the Commission repeatedly stressed the importance of securitisation markets and technology to achieving policy objectives (eg, capital markets union, financing the transition to a green economy, etc), and also recommended a number of actions to the European supervisory authorities which demonstrate the Commission has listened to market-side stated concerns. The most important of these are requests to ESMA for simplified transparency reporting templates (at asset-level, and wholesale for "private" transactions such as CLOs (both US and EU)), though inevitably these will take time to be finalised.

The main area of concern is a tightening of investor diligence and transparency standards for relevant EU investors investing in non-EU securitisations. Here, the

Commission concluded that the EU legislative intent is that such investors can only invest where a securitisation fully meets the EU's Article 7 transparency requirements and it is not permissible for the investor to decide a non-EU securitisation local market transparency practices suffice on a materially comparable or other basis. While the report is not law, the Commission's views are expected to shape market approach and so for non-EU issuers looking to sell to EU institutional investors they will likely come under increasing pressure to report to EU standards. It is hoped that the proposed simplification of the EU templates, and particularly the proposal on private transaction reporting, will considerably reduce this friction in due course and given nearly all non-EU securitisations are considered private from an EU perspective.

We shall be publishing further updates on the Article 46 report in due course.

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

Una McLaughlin +353 1 619 2798 una.mclaughlin@maples.com

Governance Perspectives for a Modern Approach to Risk Retention

Evolving structures in the European CLO space using The Taxation of Securitisation Companies Regulations 2006 in the UK, allow CLO managers to efficiently establish investment vehicles that actively originate CLOs and retain the necessary CLO equity investments to meet risk retention requirements. These structures demand a handson, sophisticated approach to the governance of the investment vehicle, along with deep knowledge and understanding of the underlying investments.

Access our full article here to read more.

Global Listings Update

Ireland

During the first half of 2022, 72 CLOs (US and European), comprising new issuances, re-financings and resets, were listed on Euronext Dublin.

Of these listings, 53 were by issuers domiciled in Ireland, 10 from the Cayman Islands, five from Delaware, three from Jersey and one from Bermuda.

The Maples Group’s Dublin office acted as listing agent for 28% of all Euronext Dublin-listed CLOs.

For further details, please contact:

Ciaran Cotter

1 619 2033

ciaran.cotter@maples.com

Cayman Islands

For the first three quarters of 2022, listings of CLOs on the Cayman Islands Stock Exchange ("CSX") have kept pace with general market conditions in the CLO space. Through to the end of September 2022, 29 CLOs, comprising new issuances, refinancings and resets, were listed on the CSX. At first glance, this may look like a decrease in CLO CSX listing volume, given that for the same period in 2021, 84 CLOs were listed on the CSX. However, the 2022 numbers are on par with the activity we saw in 2019 and 2020, rather than the unusual levels of activity we saw through most of 2021. For the same period in 2019 and 2020, 40 CLOs and 33 CLOs respectively were listed on the CSX.

Of the 29 new listings, 14 (or 48%) were by Cayman Islands issuers with a Delaware co-issuer. This is a noticeable decrease from previous years – in 2021, for example, 95% of the CSX CLO listings were by Cayman Islands issuers with Delaware co-issuers. This change is undoubtedly due to the inclusion of the Cayman Islands on the draft delegated regulation ("Draft Regulation") published by the European Commission earlier this year, updating its EU AML List. The Draft Regulation was published in the Official Journal of the European Union on 21 February 2022 and took effect on 13 March 2022. This year, the inclusion of the Cayman Islands on the EU AML List, in conjunction with certain amendments made to EU Securitisation Regulation (EU) 2017/2402 on 9 April 2021, which affect the use of special purpose vehicles established in non-EU jurisdictions

included on the EU AML List, has caused some CLO issuers to incorporate in a jurisdiction other than the Cayman Islands, as discussed in our US Market Review above.

Of the 29 new listings thus far in 2022, eight (or 28%) were by Jersey issuers with Delaware co-issuers. Two Bermudian issuers with Delaware co-issuers have listed three CLOs (or 10% of the new listings) with the CSX. This year was the first year we saw Jersey and Bermudian CLO issuers list on the CSX.

Middle market CLO issuers, however, appear to have favoured Delaware-incorporated issuer vehicles, and thus far in 2022, the CSX saw new listings by four Delaware issuers accounting for 14% of the CLO new listing volume. This continues the upward trend of Delaware CLO issuers listing on the CSX, as 2021 saw at least six such listings compared to one in 2020 and two in 2019.

The Maples Group listed 38% of all the CSX-listed CLOs during this period, including 50% of the Cayman Islands issuers and 50% of the Jersey issuers listed on the CSX.

Not surprisingly given market conditions this past year, March was the most active month for CLO CSX listings with seven new CLO listings. 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 31% of the CLO CSX listing activity through to the end of September of this year.

Although 2022 has seen CLO CSX listing activity fall significantly from 2021 levels, CSX listings of CLOs are still on track to keep pace with 2019 and 2020 figures. In addition, while the volume of Cayman Islands-incorporated CLO issuers has decreased this year due to the inclusion of the Cayman Islands on the EU AML List, with Jersey and Bermudian issuers electing to list CLOs on the CSX, as well as higher numbers of Delaware issuers, a listing on the CSX is still proving to be a popular choice for investors who require a listing on a recognised stock exchange.

For further details, please contact:

Amanda Lazier

+1 345 814 5570

The Irish Debt Securities Association – 10 Years Old this Year!

The Irish Debt Securities Association ("IDSA") is the industry body representing the Irish CLO and securitisation industry.

IDSA celebrates its 10-year anniversary this year following its establishment in 2012.

The Maples Group was a founding member of IDSA in 2012, having seen the need for an industry association to represent and promote the Irish CLO and securitisation sector for the benefit of all stakeholders active in that sector.

Since 2012, the Maples Group has helped IDSA grow to have a large membership comprising corporate service providers, law firms, auditors, tax advisers and listing agents.

IDSA regularly meets with the Irish Government, the Irish Revenue Commissioners, the Irish Department of Finance, the Central Bank of Ireland, the Irish Stock Exchange and other bodies to discuss developments on the Irish and EU legal, regulatory and tax front effecting Irish CLO and securitisation vehicles.

Andrew Quinn, Head of Tax at the Maples Group, serves as Chair of IDSA and on the IDSA Tax Committee.

Stephen McLoughlin, Head of Finance Dublin, Callaghan Kennedy, Finance Partner, and Stephen O'Donnell, Head of Fiduciary, also serve on industry committees helping to shape best practice and the market position on legal and operational questions arising on both Irish-specific and EU-wide issues impacting the CLO and wider securitisation industry, such as new legal and tax proposals, changes in regulatory and compliance guidance and updates to IFRS accounting.

The Irish securitisation industry has grown substantially in that period with Irish SPV assets now over €1 trillion according to Irish Central Bank figures and the Irish share of Euro Financial Vehicle Corporations now stands at 31.4%.

For further details, please contact:

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

The Irish Debt Securities Association: IDSA

Bringing you CLOser to the Cayman Islands Stock Exchange

It is with great pleasure and privilege that we present the Maples Group's fourth 'Bringing you CLOser…' inside view from recognised CLO industry participants and experts. In this discussion, James Reeve from the Maples Group's CLO teams speaks with Marco Archer and Eva Holt at the Cayman Islands Stock Exchange ("CSX"), on the merits of the exchange for CLO issuers and the launch of an exciting new CSX ESG Market.

MODERATOR

James Reeve Partner Maples Group

James is a Partner in the Cayman Islands Finance team at Maples and Calder, the Maples Group's law firm. He advises on structured finance transactions (in particular CLO transactions, related risk retention structures and catastrophe bonds), fund financing matters (acting for both lenders and borrowers) and general banking and financing work. James also has experience advising on asset finance transactions (particularly off-balance sheet commercial aircraft financing and leasing) and general corporate and commercial transactions, along with restructurings and securities listings on the Cayman Islands Stock Exchange.

James joined the Maples Group in 2011 and was elected as a Partner in 2018. He previously worked as a banking and finance lawyer at a magic circle firm in London where his practice focused principally on project finance. James has been ranked in the Legal 500.

PARTICIPANTS

Marco Archer CEO Cayman Islands Stock Exchange

Marco is the CEO of the Cayman Islands Stock Exchange and a former Minister of Finance and Economic Development for the Cayman Islands. Prior to that he worked as a funds and corporate attorney for several years with an international law firm; he also served as project manager for financial reform in the Cayman Islands Government, and an economic statistician in the Economics & Statistics Office.

Marco holds a B.Sc. in Economics & Finance, an MBA, an LLB (Hons), and a Diploma in Legal Practice.

Eva Holt Head of Listings Cayman Islands Stock Exchange

Eva is responsible for implementing appropriate policies and procedures relevant to the listing of securities and the administration of listed vehicles, taking into account relevant legal and regulatory issues. She acts as a first point of contact for issuers and potential clients in relation to compliance with the CSX listing rules, taking the matter through to full listing.

The Listing practice covers a wide variety of debt transactions such as CLO's, aircraft ABS, PPNs, synthetic securitisations, securitisations, repackagings, corporate debt and a large number of bank programmes for products such as structured derivatives, MTN's and bonds.

The Listing team also assists with stock exchange filings and market announcements.

James: Welcome Eva. Let's start by asking you about what the CSX is seeing in the current market, particularly in relation to CLOs.

CSX response:

We had a very strong 2021 (and especially the month of December) and the momentum from the end of last year has continued into the first quarters. Between the start of January and the end of September, we had over 300 admitted to listing and we retained our position as one of the leading venues for listing CLOs and other debt structures. The CSX, as a non-EU exchange, 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.

Last year we saw mostly refinancing and resets as well as new issuances while this year we are seeing mostly new issuances and listings of senior AAA classes.

A shift in macro-economic conditions subdued new listing applications during the third quarter. While the US CLO market is more removed from the war in Ukraine and has a much deeper investor base than its European counterpart, the knock-on effect of the war still drifted into market conditions. Also, US bank investors who were typical buyers of triple A-CLO Notes have stepped away from the market. However, Japanese investors who had been absent in the triple A US CLO market appear to be returning, filling some part of the void left by the US banks.

The US CLO market had over US$400 billion of issuance last year, with about US$180 billion of that coming in the form of new issue CLOs. So far, in 2022, only US$110 billion has been issued overall, and the final figure this year is expected to be around US$130 billion.

Specialist debt securities remained the largest proportion of new listings. We had quite a few listings of synthetic securitisation transactions arranged by large originators. We also saw an increase in corporate debt securities such as Quoted Eurobonds.

The CSX is designated as a Recognised Stock Exchange by the HMRC. Consequently, qualifying debt securities may list on the CSX to be eligible for the Quoted Eurobond Exemption. This allows an issuer liable to pay UK tax to make gross payments of interest on the listed securities without any deduction of tax.

To give you more context on this, Eurobond securities have to meet the conditions set out in ITA 2007; namely Eurobond means any security that: (i) is issued by a company; (ii) listed on a recognised stock exchange; (iii) carries a right to interest.

James: For those who are not familiar, can you tell us a little bit about the CSX?

CSX response:

We are the Premier Offshore Stock Exchange in the US time zone. And the CSX provides a platform for the listing and trading of shares, specialist and corporate debt securities and other instruments issued by investment vehicles. Based in George Town, Grand Cayman, the CSX began trading in 1996 and since its inception, it has approved securities for admission for a total market capitalization of over US$750 billion.

By providing increased visibility to issuers, CSX is the gateway to access international investors. Issuers on CSX benefit from the country’s vibrant and integrated financial ecosystem.

The CSX is recognised by various leading professional bodies that set standards for financial markets. This recognition serves to enhance the profile of the CSX and boosts investors' confidence.

While complying with the international standards for recognised stock exchanges, the CSX adopted a flexible and pragmatic approach to regulation. Consequently, we are able to provide issuers of securities with a fast and cost effective listing facility.

As clients are increasingly looking for a technical listing in order to make their structures more tax efficient, the CSX continues to grow despite current market conditions.

Also, the CSX was one of the first Exchanges to introduce: (i) the listing of limited partnership interests; and (ii) the trading of partly paid shares.

The CSX offers the following key advantages:

• A fast document turnaround time and an efficient service (a listing of a CLO or a Quoted Eurobond can typically be achieved in less than one week).

• Competitive pricing (a typical listing fee is US$2,500 with a further US$500 per issue of each additional Class) plus US$3,500 annual - so the total listing fee for a standalone listing of one class of debt is US$6,000. PIK listing fees are US$300 per listing.

• Existing documentation (for example, prospectus, offer memorandum, scheme particulars, pricing supplements) may be utilised to form the listing document, furthering the potential to save on costs.

•

A responsive and approachable Listing Committee, which meets every day to consider listing applications.

•

A pragmatic approach to disclosure requirements.

•

The Listing Rules of the CSX meet international standards and are easy to understand.

• The CSX operates outside of the EU and no EU directives directives apply, thus making the regulatory burden less onerous.

• All qualifying debt securities listed on the CSX are eligible for the Quoted Eurobond Exemption, which allows an issuer liable to pay UK tax to make gross payments of interest on the listed securities without any deduction of tax.

•

Experienced listing agents and advisers in the Cayman Islands, such as the Maples Group.

James: How does an issuer or security qualify for the CSX ESG Market?

CSX response:

There are two ways in which an issuer or security can qualify for the CSX ESG Market:

1. Framework - Either: (i) the issuer's business, or that of its wider group; or (ii) the use of the proceeds raised by the issuance of a security; must be verified as having an environmental, social or sustainable purpose by an appropriate independent third party against a recognised framework.

2. Rating - The issuer's business, or that of its wider group, must be positively rated by an appropriate independent party.

James: Are there any new developments at the CSX that might be of interest to the CLO industry?

CSX response:

Yes. Excitingly, the CSX has established a separate market segment for environmental, social and corporate governance ("ESG") investments, the CSX ESG Market. As a responsive, pragmatic and flexible Exchange, we have created this market in response to global trends.

James: You mention verification and rating of an issuer's business by an "independent party" – who would qualify for these purposes?

CSX response:

James: That's fantastic – and ESG is certainly a hot topic and ever evolving area. Can you tell us more and how it might benefit our CLO clients?

CSX response:

In 2013, the CSX devised specialist listing rules for clean technology companies and now that the need for investors and companies to manage climate risks and create impact becomes ever more important our expanded ESG segment offers a comprehensive platform for sustainable debt financing. The CSX embraces ESG head on by encouraging issuers and investors to consider ESG aspects as an opportunity, promoting their efforts to comply with best market practices and giving investors clarity.

There are many independent service providers, including some of the major auditing firms and law firms, who have been working on a methodology to assist their clients to meet the new ESG requirements which are increasingly being adopted by various jurisdictions. The CSX is developing criteria for the recognition of independent third parties, so that we are reassured that the methodology being used is sound and that the possibility of greenwashing is detected, and flagged. The Cayman Islands are, as may be expected for a small island, very concerned about the destructive impact of climate change, and being thorough about our ESG criteria means encouraging people to do the right thing, and continuing the reputation of the Cayman Islands as having sound business practices.

James: What are the advantages of the CSX ESG Market?

CSX response:

We are excited by what this market can offer. Some key advantages include:

I. The CSX ESG Market covers a full suite of asset classes and instrument types, ranging from plain vanilla bonds to more complex instruments such as asset-backed securities.

II. It helps deliver a broad sustainable finance platform to issuers and investors.

III. The CSX ESG Market is open to issuers from any jurisdiction.

IV. Securities admitted to the CSX ESG Market are subject to international standards in order to enhance investor confidence in the level of disclosure related to their sustainability frameworks and reporting.

V. The CSX ESG Market offers issuers the opportunity to display key documents such as external reviews, sustainability frameworks and annual sustainability reports on their dedicated profiles. The CSX accepts external reviews consistent with ICMA Guidelines for External Reviews⁷.

VI. The investment must be first admitted to CSX’s Official List before being eligible for entry to the CSX ESG Market.

VII. No additional charges for admission to, or an ongoing presence on, the CSX ESG Market.

Our standards are simpler than SEC standards, while still having a separate regime which is in line with international standards, and creating more visibility for ESG investments and contributing towards building a holistic culture of sustainability.

James: How will this ESG Market benefit CLO issuers in particular?

CSX response:

ESG is overall a relatively new market segment and having a ‘green bucket’ of only sustainable loans is perhaps not yet commercially viable for collateral managers. Therefore, rather than making it a positive requirement to invest in only sustainable assets, managers are being prevented from investing in ‘non-ESG’ assets.

CSX can provide qualifying CLO issuers and their securities with enhanced connectivity, credibility, transparency and visibility among investors.

James: What is involved in applying to the CSX ESG Market?

CSX response:

The ESG securities must initially qualify for listing on the Official List of the CSX before applying for entry to the CSX ESG Market.  We also require the submission of a CSX ESG Market Declaration. Also required is the submission of an independent third-party review which is consistent with ICMA Guidelines to demonstrate that the issuer or security holds a qualifying credential for admission to the CSX ESG Market.

The ESG Market Declaration is available on our website and it can be submitted via your usual contacts at CSX or by email to listing@csx.ky.

The CSX ESG Market Declaration Form should include the following information:

I. Description of the classification of the securities being admitted;

II. Use of proceeds certified (green, social or sustainability) or issuer-level classified (green revenues or sustainability-linked bonds); and

III. Disclosure of mandatory sustainability related documents as applicable, such as an Independent External Review; and an acknowledgement and commitment to ongoing post-issuance reporting obligations.

James: What evidence is required as part of a CSX ESG Market application?

CSX response:

As part of a CSX ESG Market application, we require the evidence to demonstrate that the issuer or security holds a relevant qualifying credential. In essence, this comprises either submitting a copy of a current and valid independent third party report or disclosing where this is publicly available. An issuer may provide one URL (link) beginning https to an area on the issuer’s website where current and future ESG related documents and reports are accessible.

Please note that the already signed CSX ESG Market Declaration Form will be deemed to apply to future ESG issues – where a revised framework or external review applies, these should be submitted to listing@csx.ky or accessible through a link previously provided. In respect of the latter option, please notify CSX if the link has been updated to include new or revised ESG documentation.

the most relevant ongoing public ESG reporting in relation to the issuer or security. Issuers should notify the CSX if a link has been updated to include new or revised ESG documentation.

The CSX advises issuers to annually publish an allocation report until the full allocation of proceeds, as well as an impact report, at least once before the full allocation of proceeds.

James: Talk us through the listing process.

CSX response:

The application process is normally carried out in two main stages. The first stage is the initial submission of draft documents and the second stage is the submission of final, signed documents.

The process for listing ESG securities follows the standard two-step listing process with the additional benefit of enhancing the profile of the securities through the admission to the CSX ESG Market.

Eligibility for admission of securities to the CSX ESG Market is conditional on: (i) listing on the Official List of the CSX; and (ii) submission of a completed and dated CSX ESG Market Declaration Form.

An independent third-party external review should be submitted at the time of application before securities can be displayed on the CSX ESG Market.

The proposed issuer must provide verification of the ESG investment's credentials by an appropriate third party. The third party conducting the review must be:

I. independent of the entity issuing the securities;

II. free of any conflicts of interests arising; and

III. an entity specialising in assessing the ESG framework.

There is no preference which framework will be used but note that the CSX will only accept external reviews consistent with ICMA Guidelines for External Reviews.

Should any issuer have any questions in respect of the above, these can be directed to the Listing Department.

James: What are the ongoing reporting requirements for the CSX ESG Market?

CSX response:

As part of admission to the CSX ESG Market, we ask applicants to publish a URL link that provides access to

As soon as the issuer becomes aware of such information, issuers should provide the CSX with any information that may cause the ESG securities to no longer qualify for the CSX ESG Market.

James: Exciting times at the CSX that's for sure, with the launch of this new ESG Market. Readers can of course find the usual Maples Group US and European market reviews on pages 2 and pages 7, respectively.

The Maples Group global CLO team continues to grow and build upon our depth and breadth of experience and to produce valuable analysis and collaborative market commentary. We thank the CSX team for its update.

Jersey as

Jurisdiction for Global Securitisation Sponsors

What did you do before working at the Maples Group?

I started my career as a summer intern with the Maples Group while completing my Bachelor of Laws at the University of Birmingham in the United Kingdom. While interning, I developed, among other things, what are now well-established relationships with people throughout the Group. I completed Law School at the University of Law and, when it was time for me to make a decision as to where I wanted to start my career, joining the Maples Group as a truly international firm was my first choice. I am a lover of travel and now, sitting here on secondment in our Dubai office, it is clear that joining the Maples Group was one of the best decisions I've ever made.

What do you like to do in your spare time?

I am currently enjoying reading 100 Essays That Will Change The Way You Think. I also love being active and try to have a dedicated exercise session at least four times each week. I started attending spinning classes since the COVID-19 pandemic and have incorporated two spin sessions into my weekly regimen, which has been very rewarding and fun. I am also a huge foodie; so if I am not exercising, I am probably eating. Life is about balance, right!

Do you have any talents that most people don't know about?

I have an exceptional memory. It is of course very useful at work, particularly given the high volume of transactions we work on. It's also useful in social settings; I love music and I am somewhat of a music library - I am pretty confident I know over 1,000 songs word-for-word.

Tell us two fun facts about yourself.

I am currently on a quest to travel to 50 countries by the time I am 30 years old. I have visited 43 countries to date and will need to visit seven in the next year to accomplish my goal. Being on secondment in the Middle East will facilitate this and I'm aiming to visit as many places as I can throughout the region during my time here, starting with Oman later this year.

I spontaneously went skydiving in Cairns a few years ago. I went to Cairns to visit the Great Barrier Reef, as everyone does, and had an unplanned day there. I saw a brochure for skydiving in my hotel lobby when I went for breakfast, called them and went skydiving that afternoon! I had never even contemplated doing it before then but it was one of the most exhilarating things I have ever done.

Renee Lindo

| Legal Services

Sam Ellis

Senior Vice President | Head of Fiduciary Services

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A Global Team

Our CLO team comprises 33 specialist CLO lawyers and 58 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

Cayman Islands

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

James Reeve +1 345 814 5129 james.reeve@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

Anthony Philp +1 345 814 5547 anthony.philp@maples.com

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

Dublin

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

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

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

Hong Kong / Singapore

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

Jersey

Paul Burton +44 1534 671 312 paul.burton@maples.com

London

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

Luxembourg

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

Fiduciary Services

Cayman Islands

Guy Major +1 345 814 5818 guy.major@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

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

London

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

Luxembourg

Constanze Schmidt +352 26 68 62 71 constanze.schmidt@maples.com

Netherlands

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