On May 12, 2020, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) issued a press release regarding the Term Asset-Backed Securities Loan Facility (“TALF”) that included links to a revised term sheet (the “May Term Sheet”) and answers to new FAQs (the “FAQs”). The FAQs contain significant clarifications to certain program terms that on the whole should be a catalyst for new collateralized loan obligation (“CLO”) issuance in the near future.
As described in our client alert of April 9, 2020, the previous TALF term sheet, issued on that same date (the “April Term Sheet”), announced that AAA tranches of static CLOs would constitute eligible collateral under TALF and required the underlying credit exposures to be “newly issued” without defining the meaning of that term. The May Term Sheet helpfully clarifies that leveraged loans originated on or after January 1, 2019 qualify as underlying credit exposures for eligible TALF collateral.
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