Here is the bottom line for the Volcker TruPS CDOs interim final rule issued by the U.S. regulators yesterday.
No Relief for CLOs: The rule does not help CLOs at all.
TruPS CDOs: For TRuPS CDOs we believe it will be very helpful.
Specifically, the interim final rule permits any banking entity, large or small, to retain an interest in, or to act as sponsor (including as trustee) of, an issuer that is backed by TruPS so long as:
- The TruPS CDO issuer was established before May 19, 2010;
- The banking entity reasonably believes that the offering proceeds received by the issuer were invested primarily in Qualifying TruPS Collateral; and
- The banking entity’s interest in the vehicle was acquired on or before December 10, 2013 (unless acquired pursuant to an M&A).