On April 9, 2020, the Board of Governors of the Federal Reserve System (the "Federal Reserve") issued a press release indicating that the Term Asset-Backed Securities Loan Facility ("TALF") would be expanded to include AAA tranches of certain newly issued collateralized loan obligation ("CLO") securities as eligible collateral thereunder. The Federal Reserve limited eligible CLO collateral to static CLOs backed by leveraged loans, meaning that securities issued by actively managed CLOs and commercial real estate CLOs will not constitute eligible collateral for TALF. While the requirement that underlying credit exposures must be "newly issued" could limit the value of this program to CLO managers in the current market environment, the inclusion of AAA tranches of static CLO securities in the scope of eligible collateral for TALF is a positive development for the CLO market.
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