Loans in Action

Loans in Action

Each day, leveraged loans and CLOs help innovative and productive American companies by providing access to needed capital. Below are some firsthand testimonials of the important role this financial product plays in their ongoing success.

  • Stephen L. Clanton; Executive Vice President and CFO, American HomePatient

    The agencies' proposed regulations would adversely affect important commercial loan markets and borrowers dependent upon them by severely curtailing the formation of CLOs. That impairment of credit markets would harm companies like ours and the employees, owners, and consumers dependent on those companies. (Comment Letter on Notice of Proposed Rulemaking: Credit Risk Retention, SEC (File No. S7-14-11) FDIC (RIN 3064-AD74) OCC (Docket No. OCC-2013-0010) FRB (Docket No. R-1411) FHFA (RIN 2590-AA43) HUD (RIN 2501-AD53), December 18, 2013)

  • U.S. Representative Scott Garrett (R-NJ)

    "CLOs are a type of ABS that are backed by syndicated loans to businesses, and they are a major source of financing to mid-sized companies that cannot cost-effectively issue corporate bonds." (Testimony to the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, "The Dodd-Frank Act's Impact on Asset-Backed Securities, February 26,2014)

  • Joe Dutra, CEO of Kimmie Candy

    "One of the regulations they should evaluate is the risk retention rule, which as its currently written could significantly reduce loan availability. The rule was implemented in December and will ultimately make it more expensive for companies like mine to get funding for things like expansions through the leveraged loan market. Access to this market is important because non-investment grade companies, which include a vast majority (72 percent) of US businesses, rely on leveraged loans for financing." (Joe Dutra, Congress can help small Reno businesses with taxes, "Reno Gazette-Journal," March 23, 2017)

  • David Graziosi; Executive Vice President, CFO and Treasurer, Allison Transmission Inc.

    “If the [risk retention] rules as re-proposed are adopted, we fear that CLOs will become a much-diminished presence in the marketplace, making less credit available for the commercial loans that provide lifeblood to our companies.” (Comment Letter on Notice of Proposed Rulemaking: Credit Risk Retention, SEC (File No. S7-14-11) FDIC (RIN 3064-AD74) OCC (Docket No. OCC-2013-0010) FRB (Docket No. R-1411) FHFA (RIN 2590-AA43) HUD (RIN 2501-AD53), October 30, 2013)

  • Norm Chambers, Chairman, President and CEO, NCI Building Systems

    "CLOs have proven to be a valuable resource for our company because they provide commercial loans at affordable rates and have ultimately increased the availability of debt at a reasonable cost for businesses like ours, American manufacturing companies investing in U.S. economic recovery." (Norm Chambers, Memo to Regulators: Restricting CLOs Could Stifle Economy, "American Banker," April 4, 2014)

  • Senator Gary Peters (D-MI)

    "Collateralized Loan Obligations, or CLOs, are part of the spectrum of financing that keeps Michigan businesses moving forward. Michigan industries that currently rely on CLOs show the diversity of Michigan's economy and include not just auto manufacturing and parts suppliers, but media and communications firms, textile and apparel manufacturers, retail and supermarkets, and utilities, as well as gaming and hospitality." (Testimony to the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, "The Dodd-Frank Act's Impact on Asset-Backed Securities, February 26, 2014)

  • Matthew Kang; Vice President and CFO, HCR Manor Care

    “In our experience, CLOs serve as a valuable source of credit and liquidity for lenders to companies of many sizes, in every industry and in every region of the country. ... [C]LOs provide an important means for bank lenders to manage their credit risk, comply with capital regulations and free up resources to engage in further lending.” (Comment Letter on Notice of Proposed Rulemaking: Credit Risk Retention, SEC (File No. S7-14-11) FDIC (RIN 3064-AD74) OCC (Docket No. OCC-2013-0010) FRB (Docket No. R-1411) FHFA (RIN 2590-AA43) HUD (RIN 2501-AD53), October 30, 2013)

  • David Smith; President, Cornerstone Healthcare Group

    “We have depended on the CLO market for financing for a number of years and we are concerned about the recent risk retention rule and how it will impact our ability to affordably finance our operations and continue to create jobs in the states we operate.”

    “Open Market CLOs present no market failure requiring a regulatory solution. The proposed credit risk retention rules fail to account for the significant factors that already ensure that Open Market CLO managers select and manage CLO assets prudently and in investors’ interests.” (Comment Letter on Notice of Proposed Rulemaking: Credit Risk Retention, SEC (File No. S7-14-11) FDIC (RIN 3064-AD74) OCC (Docket No. OCC-2013-0010) FRB (Docket No. R-1411) FHFA (RIN 2590-AA43) HUD (RIN 2501-AD53), January 16, 2014)

  • U.S. Representative Andy Barr (R-KY)

    "Today, CLOs continue to provide over $300 billion in financing to U.S. companies, including companies that are well-known to all of us in this Chamber—Dunkin’ Donuts, American Airlines, Burger King, Neiman Marcus, Delta Air Lines, Goodyear Tire, and even a mattress and bedding company in my hometown of Lexington, Kentucky, Tempur Sealy." (Floor speech during consideration of “Restoring Proven Financing For American Employers Act,” Congressional Record, p. H3258, April 29, 2014)

  • U.S. Representative Robert Hurt (R-VA)

    "In Virginia's 5th District, my District, many companies rely on the CLO market to finance their operations, including a financial information firm headquartered in Charlottesville, with over 2,600 employees, and an auto parts manufacturer in Southside." (Testimony to the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, "The Dodd-Frank Act's Impact on Asset-Backed Securities, February 26, 2014)

  • David Hirschmann, U.S. Chamber of Commerce, Center for Capital Markets Competitiveness

    “[Without CLOs], businesses would have fewer funding options, higher borrowing costs and reduced credit availability.” (Joe Adler, Why Banks Are Still Wary of Credit Risk Retention Plan, "American Banker," November 18, 2013)

 


What They Are Saying

  • “The reduced financial burden would allow less-capitalized managers to comply with the retention rules and issue new CLOs, and could allow other managers to issue a greater number of CLOs without external financing.”

    Lana Deharveng, Senior Analyst at Moody's

    “[CLOs are] an important part of the economy overall and the single-largest lender to corporations beside banks.” (Stephanie Armour, Lenders, Companies Balk at Proposed Loan Rules, “The Wall Street Journal,” November 28, 2013)

    Josh Terry, Highland Capital Management LP
  • “[T]he historic default rate of CLOs is under 1.5%, and the loss given default much lower than that. These are assets that withstood the stress of the financial crisis and continue to trade at or close to par.” (Testimony before the House Financial Services Committee on behalf of the U.S. Chamber of Commerce, “The Impact of the Volcker Rule on Job Creators Part 1,” January 15, 2014)

    David C. Robertson, Treasury Strategies, Inc.

    “The Barr-Scott bill’s lower risk retention requirement would significantly reduce the financial burden for managers bringing new deals to market. This would encourage new CLO issuance, thereby adding liquidity to the leveraged loan market. It would also formalize objective credit criteria for qualified CLOs, which in turn would discourage the issuance of riskier types of CLOs.”

    Lana Deharveng; Senior Analyst, Moody's
  • “The asset-backed market matters because it fuels lending to the real economy.” (Jody Shenn, It’s Like 2009 for Some Asset-Backed Securities Rattled by the Fed, “Bloomberg Business,” August 17, 2015)

    Jody Shenn, Bloomberg Business

    “While they may not have a high profile, CLOs provide a valuable function that our recovering economy cannot do without” (Floor speech during consideration of “Restoring Proven Financing For American Employers Act,” Congressional Record, p. H3257, April 29, 2014)

    U.S. Representative Scott Garrett (R-NJ)
  • “Having grown over the course of time, CLOs provide business financing to companies in 47 states and the District of Columbia that collectively employ over five million Americans. … A broad swath of corporate America participates in this market, including companies from the health care, energy, retail, entertainment, and telecommunications sectors, to name just a few.” (Testimony to the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, “The Dodd-Frank Act’s Impact on Asset-Backed Securities, February 26, 2014)

    Tom Quaadman, Center for Capital Markets Competitiveness

    “CLOs represent a vital source of credit and remain an important financing resource for small to mid-size businesses across the country. Losing or restricting CLOs will make it not only harder to access capital, but it will make the loan process more expensive, ultimately reducing funds needed to build businesses and stifling future economic growth.” (Joe Dutra, Congress can help small Reno businesses with taxes, “Reno Gazette-Journal,” March 23, 2017)

    Joe Dutra, CEO of Kimmie Candy
  • “CLOs are products that help provide large amounts of credit to small businesses. They are debt securities, and they performed well through the greatest financial crisis of our time, and they continue to perform well.” (House Financial Services Committee Hearing, “The Impact of the Volcker Rule on Job Creators, Part II,” January 15, 2014)

    U.S. Representative David Scott (D-GA)

    “CLOs are important tools to expand credit availability.” (Rob Blackwell, Volcker Fix Leaves Some Small Banks Out in the Cold, “American Banker,” January 16, 2014)

    Jaret Seiberg, Guggenheim Securities
  • “CLOs performed extraordinarily well, yet risk retention rules don’t seem to acknowledge the fact that these securities, which performed well, helped finance more than 1200 companies that employ more than 600 million people.” (House Financial Services Committee Hearing, “The Impact of the Dodd-Frank Act and Basel III on the Fixed Income Market and Securitizations”, February 24, 2016)

    U.S. Representative Ann Wagner (R-MO)

    “CLOs are primarily used by small, midsize, or challenged businesses as a non-investment grade vehicle.” (Letter to The Honorable Andy Barr, March 10, 2014)

    R. Bruce Josten, U.S. Chamber of Commerce
  • “We need a healthy leveraged loan market. The country needs it to finance capital investment.” (Glen Fest, Babson CEO Finke: CLOs Often Unfairly Judged, “Asset Securitization Report,” April 24, 2014)

    Tom Finke, Babson Capital Management

    “Collateralized loan obligations, or CLOs, have proven to be a critical source of funding for U.S. businesses over the last 20 years.” (Floor speech during consideration of “Restoring Proven Financing For American Employers Act,” Congressional Record, p. H3258, April 29, 2014)

    U.S. Representative Andy Barr (R-KY)
  • “There has to be a revisitation of the regulation that had been introduced in the past few years about Asset Backed Securities to eliminate some of the undue discriminations toward this specific product when this product is simple, real and transparent” (Jim Brunsden, Basel Pushes Risk Realism as Draghi Prepares to Buy ABS, “Bloomberg Business,” June 11, 2014)

    Mario Draghi, President of the European Central Bank

    “[W]e should be mindful of the fact that CLOs provide financing to businesses that cannot access the debt markets affordably, if at all. For many of these companies term loan financing is their only recourse.” (Testimony before the House Financial Services Committee on behalf of the U.S. Chamber of Commerce, “The Impact of the Volcker Rule on Job Creators Part 1,” January 15, 2014)

    David Robertson, Treasury Strategies, Inc.

Sign up for our newsletter

Want to keep up to date with all of our latest news and information? Enter your email below to be added to our mailing list.