Cayman Islands Corporate Law as a Tool for Innovative CLO Warehouse Structuring

Abstract

The Cayman Islands is well known to be the jurisdiction of choice for structured finance transactions due to its robust legislation and judicial framework, its creditor friendly nature, its familiarity to market participants (in particular, rating agencies), and the list goes on. What is less obvious, and arguably more intriguing, is the increased reliance on basic features of Cayman Islands corporate law to facilitate innovative structuring, particularly at the warehouse stage of a collateralized loan obligation transaction, and create greater efficiencies in transaction execution. The existence of these features is not novel; however, their increased adoption is. In this article, the authors explore the most commonly utilized features and the ways in which they support transaction innovation. TOPICS: CLOs, CDOs, and other structured credit; legal and regulatory issues for structured finance Key Findings • The flexibility of the Cayman Islands corporate regime allows for bespoke structuring. • There is an ever-increasing reliance on basic corporate law features to support transaction innovation. • Cayman as a jurisdiction is commercially responsive, facilitating efficient transaction execution through a robust statutory framework and evolving market practices.