Rating Agency Backlog

Traditional refinancings are cumbersome, time-consuming and costly.

Why does the traditional refi process take so long? 

Historically, CLO refinancings have been conducted by Arranging Banks that lead a complex process similar to a new issuance. This means that CUSIPs are destroyed and re-issued, and securities are re-rated. All of this results in unnecessary expenses and time delays. Traditional refinancings place unnecessary constraints on CLOs.

Limitations often include the inability of CLO managers to identify and coordinate equity holders to form a majority required to trigger a refinance. Backlogs at rating agencies delay CLO issuance, forcing investors and managers into a process with little optionality and long wait times. With CLO issuance growing at a rapid pace, waiting for several months to get to the front of the line has left investors questioning if there is a better way.

While some may think that CLO manager’s primary job is to focus on selecting assets, managing CLO liabilities is equally important for CLO returns. Leverage loan repricings can lead to uneconomic risk/return outcomes for a CLO. The ability to adjust the cost of liabilities frequently and economically is the key to successful CLO management.

AMR reimagines traditional refinancings by moving a formerly primary process to the secondary market. Compared to a single dealer underwriting in a traditional refinancing, AMR auctions provide extra liquidity through multi-dealer syndication and broader investor reach. There is no rating agency, legal counsel or Arranging Bank involvement.

Why wait weeks or even months to refinance a CLO? Refinance in 10 days through a multi-dealer auction. With AMR, investors can gain valuable market data insights while saving time and resources. CLO managers who utilize AMR may enhance CLO returns and free up time to focus on asset management, while others are waiting in the rating agency queue.