CLOs
Arthur Cox is a principal Irish advisor in the European CLO market. From advising the pre-eminent Irish-domiciled CLO managers to developing bespoke risk retention structures in Ireland using Section 110 vehicles, we are at the forefront of the key regulatory and structuring issues facing the European CLO market and also helped establish the ‘originator structure’ first used in Europe by Blackstone on the Phoenix Park transaction.
Ireland increasingly dominates the EU CLO market in large part due to its robust legal framework and finely tuned tax system.
Favourable tax laws allow the structures to be, in most cases, tax neutral (with a minimal annual profit or ‘spread’ required at the SPV level) and a ‘quoted eurobond’ exemption allows interest on securities to be paid gross. A minimal share capital requirement of €1 in most cases makes incorporating an Irish SPV an easy process. Additionally, Euronext Dublin is a market leader in the listing of debt securities, including CLOs.
SUMMARY OF BENEFITS OF ESTABLISHING CLOs IN IRELAND
- EU jurisdiction with a broad double tax treaty network
- Common law legal system, similar in many respects to US and UK
- Favourable tax status for CLO issuers which should result in: - Minimal corporate tax leakage - No withholding tax and limited VAT leakage - No VAT on collateral management or administration fees
- Leading jurisdiction for listing CLOs
- Cost efficient jurisdiction involving: - No thin capitalisation requirement - Minimal minimum profit - Competitive service provider and audit costs - Competitive and sophisticated legal market
- AIFMD certainty
LEGAL SYSTEM AND COUNTRY STATUS
Legal System
Like the UK and the US, Ireland is a common law jurisdiction and its legal concepts will be recognised by most investors, originators and advisers.
Ireland is a member of the EU, the Eurozone and the OECD.
For many originators and potential investors, this is a key advantage of locating an SPV in Ireland. Investors in some jurisdictions may want to purchase debt issued by EU/OECD issuers only, and the inability to access those investors if the SPV is located elsewhere may affect the pricing of a transaction.
Tax Structure
There is an international trend away from investing in so-called tax havens. Some investors take comfort from the fact that Ireland is not a tax haven and has a developed corporate legal system and tax structure.
Taxation
The Irish government has put in place advantageous tax laws for finance vehicles in Ireland. The key relevant points are:
Establishing SPVs in Ireland
Arthur Cox Stock Exchange and Listings Services have been guiding issuers through the relevant listing rules and requirements since 2004.
Stock Exchage and Listings Services
Euronext Dublin has a particular strength in listing CLOs of both European and US originators. Its Global Exchange Market (an exchange-regulated market) has also become an increasingly popular market for issuers seeking an EU-based listing, including CLO transactions. We advise on the listing of a wide variety of asset-backed debt and fund transactions.
Experience
We have unrivalled experience in CLOs and in particular complex warehousing and originator structures
Helen Berrill
Director of our Stock Exchange and Listings Services Group
+353 1 920 1203 Helen.berrill@arthurcox.com