Bermuda CLOs: Top 3 Tips

Following the inclusion in February 2022 of the Cayman Islands on the European Union’s AML list, managers and investors have been turning to Bermuda as an alternative jurisdiction in which to incorporate issuers of collateralised loan obligations where the investor base is anticipated to include those based in the EU. In fact, Bermuda has emerged as one of the two major jurisdictions of choice for US CLO managers seeking to market deals to EU investors and in the first quarter of 2022 the Bermuda team has seen a number of new incorporations and existing structures in warehouse phase migrating to Bermuda. 

The jurisdiction’s advantages for managers and investors are numerous: tax neutrality, the stability of its legal and political system, its compliance with international standards including FATCA/CRS and the familiarity of rating agencies with Bermuda structures  established through the jurisdiction’s status as the global market leader in insurance-linked securities. CLO issuers are not subject to Bermuda’s AML or economic substance regimes and there is no requirement to prepare financial statements if the directors and shareholders agree to waive their preparation. None of this has been lost on our clients who have migrated into the jurisdiction. 

With these new entrants to the Bermuda market, Walkers has noticed a number of FAQs posited by the US market prior to pulling the trigger on domiciliation. The below article gives an overview as to the “need-to-knows” for any manager looking to set up shop in Bermuda.

Click to view advisory

Related Content