Applicable Margin Reset
is the answer

A structural feature designed to simplify CLO refinancing and bring efficiency to the market

Applicable Margin Reset (AMR) utilizes a modified Dutch auction procedure to set the new interest rate on individual classes of eligible CLO securities. Auctions are conducted through an Auction Technology Service Provider utilizing an online platform. After the auction is finished, all of the results are made public.

AMR procedures can be initiated by the collateral manager or the majority holders of subordinated notes. Alternatively, the AMR procedures may also be initiated automatically according to the CLO indenture.

AMR procedures require neither the redemption nor issuance of any replacement class. As a result, AMR procedures avoid the costly, time consuming, document intensive processes associated with traditional refinancing.

Traditional Refinancing

VS

Applicable Margin Reset

Inefficient

Typically, the deal is rolled with a large number of current investors and broader market is not consulted for the best possible pricing.

Profitable

Open to broader market participants bidding for potentially better refinancing rates.

Costly

Costs usually hit the upper 6-figures for an average size refinancing.

Inexpensive

Underwriters and rating agencies are not required and legal fees are minimized.

Onerous

Can be difficult to get a slot in the dealer’s pipeline especially around coupon payment dates.

Easy

Auctions can be held any-time after the non-call period is over at the decision of CLO equity or the CLO manager.