Listing on CSX: why Cayman works for US CLO managers

For US CLO managers, the Cayman Islands Stock Exchange combines the benefits of a recognised stock exchange with a listing regime designed for structured finance transactions.   

This briefing explores the advantages of listing CLO notes on a recognised stock exchange and examines the Cayman Islands Stock Exchange’s (CSX) particular appeal for US managers. 

Why list CLO notes on a recognised exchange?  

Tax: the UK quoted Eurobond exemption 

Perhaps the most important reason is the UK ”Quoted Eurobond Exemption” (UK quoted Eurobond exemption)^[1]. Under UK law, interest paid on a security carries a withholding tax obligation unless an exemption applies. One of the most widely used exemptions is for a "quoted Eurobond" — broadly, a security that is: 

• issued by a company
• carries a right to interest
• is listed on a recognised stock exchange 

 The CSX is such a recognised stock exchange and is renowned for its expertise when it comes to the listing of collateralised loan obligation (CLO) notes.    

Investor eligibility and mandate restrictions

Many institutional investors are subject to internal or regulatory investment restrictions that limit or discourage holdings of unlisted / unquoted securities. A listing on a recognised exchange:

• allows investors whose mandates require or favour listed securities to participate, widening the potential investor base
• can improve the regulatory or capital treatment of the notes for certain regulated holders (for example, insurers and some funds) that receive more favourable treatment for listed instruments
• helps certain investors satisfy eligible asset or diversification rules that reference listed securities

Why Cayman and the CSX for US CLO managers?

Streamlined issuance and listing

Cayman is the dominant jurisdiction for the CLO issuer itself because it is tax-neutral (no Cayman income, corporation, capital gains or withholding tax at the issuer level), has a well-developed body of law familiar to US and UK practitioners, is creditor-friendly and bankruptcy-remote-friendly and imposes no exchange controls.  

Pairing a Cayman issuer with a CSX listing is convenient and cost-effective because: 

• the CSX is a well-regulated and internationally recognised stock exchange
• its listing rules are tailored to special purpose / structured finance vehicles, with a fast, predictable and relatively low-cost listing process and continuing obligations that are proportionate for a debt-only special purpose vehicle (SPV)
• the CSX's listing rules do not require a local listing agent to be appointed for an application to list specialist debt securities — the issuer's or lead manager's legal advisers may deal directly with the CSX's listing department, reducing costs and improving efficiency
• being in the same jurisdiction as the issuer streamlines documentation and ongoing compliance

Euronext Dublin and The International Stock Exchange (TISE) (which operates out of jurisdictions such as Guernsey and Jersey) are other common choices for similar reasons — well-established, structured-finance-friendly debt listing regimes offering recognised-exchange status. 

Reputational and operational benefits

Transparency and marketing 

A CSX listing provides a recognised venue for disclosure of offering and ongoing information, which some investors value even where active secondary trading is minimal.

Ratings and market perception

Listing on the CSX can support the perception of a more institutional instrument, complementing the ratings that CLO tranches carry.

Clearing and settlement

CSX listed notes fit neatly into the standard Euroclear / Clearstream settlement infrastructure used for these instruments. 

Listing Cayman-issued US CLO notes on the CSX or another recognised exchange can allow use of the UK quoted Eurobond exemption, opens the notes to investors restricted to listed securities, and does so through exchanges whose rules are purpose-built for structured finance SPVs — all while the issuer remains in a tax-neutral, creditor-friendly jurisdiction. 

Learn more about the regulations, obligations, timescales and fees for listing on CSX and other recognised jurisdictions:  

Listing on TISE, Euronext, the CSX, the VSE or the LuxSE: a comparison

The CSX's listing rules

Chapter 8 of the CSX Listing Rules governs the listing of specialist debt securities such as CLO debt. To qualify for a CSX Chapter 8 listing, an issuer must satisfy various conditions. It must also publish and maintain a listing document containing: 

• preliminary information about the issuer and securities
• a prescribed responsibility declaration
• material risk factors
• full terms of the debt securities
• rating
• form and denomination
• interest, redemption, payment and taxation
• structure and cash flow
• financial information and material contracts 

Once listed, an issuer must:

• notify the CSX of material new developments
• ensure equal treatment of holders
• publish audited annual financial statements within nine months
• notify the CSX of changes in rights, interest decisions, purchases or redemptions and changes to key parties, business, constitution, directors and auditors

How Ogier can help

Ogier’s Structured Finance team advises on CLO transactions, structured finance vehicles and debt listings across leading recognised exchanges. 

Our Cayman team regularly advises on CSX listings and works alongside Ogier Global's corporate and fiduciary specialists, who provide issuer and SPV services throughout the transaction lifecycle. 

Where transactions require alternative listing venues, our teams also support listings on Euronext Dublin and TISE, bringing together legal and corporate and fiduciary expertise across our international network. 

^[1] The concept of the quoted Eurobond exemption is not uniquely British. Several other jurisdictions have developed functionally similar domestic-law exemptions designed to relieve withholding tax (WHT) on interest paid on publicly offered or listed debt securities.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice