Partner John Goldfinch, of Milbank LLP’s Alternative Investments Group in London, was quoted in a September 5 Bloomberg article, “Europe’s Brexit-Ready CLO Managers Say It’s Business as Usual.” The article highlights issues that may affect the markets in the run-up to the October 31 deadline for the UK to exit the European Union.
In spite of concerns about uncertainty, Mr. Goldfinch noted that “Newer deals are Brexit-proofed, and there is nothing insurmountable with regards older transactions. The known unknown is that we still don’t know what form Brexit will take, but I don’t see roadblocks to issuance.”
In a summary of concerns facing of Europe’s 51-strong issuer base, which is mainly based in London, the article reports that six of the 48 CLOs issued this year, have seen UK-based managers acting as sponsors in order to satisfy requirements for risk retention. Mr. Goldfinch commented, “No one is assuming they can be a third country sponsor. This risk of being wrong is very high, both from a reputational perspective and in terms of the potential penalties imposed.”
With a no-deal Brexit, Mr. Goldfinch added, “in theory there should be solutions with respect to the provision of management services.” However, he added, “managers may have to amend docs, which can be cumbersome and expensive.”