Media Mentions
Schulte partner Martin Sharkey on how European CLO managers can deal with stressed assets
September 4, 2024
Schulte Roth & Zabel partner Martin Sharkey was featured in a PitchBook article that discussed the wide array of tools European Collateralized Loan Obligation (CLO) managers have to handle stressed and distressed assets. According to the article, the expected restructuring of Altice France's debt could compel CLO managers to reclassify some obligations, potentially using less common tools like uptier priming debt, loss mitigation obligation or bankruptcy exchange buckets. Despite their underuse, these tools are crucial in a challenging market with sophisticated sponsors.
Martin highlighted the balance CLO managers must strike between flexibility and investor safeguards. “Managers like the flexibility to be able to add loss mitigation obligations and uptier priming debt to the portfolios, but it is quite common to receive pushback from debt investors on this flexibility,” he said. Martin further explained that these tools are seen differently by various investor groups, with some viewing them as essential defense mechanisms, while others prefer to limit their use due to concerns over manager expertise.
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On Aug. 19, 2024, the US Securities and Exchange Commission (the “SEC”) charged Obra Capital Management, LLC (“Obra Capital”) with violations of Rule 206(4)-5 under the Investment Advisers Act of 1940, otherwise known as the “Pay-to-Play Rule” (the “Rule”), arising out of a $7,150 campaign contribution made by an individual prior to joining Obra Capital.[1] This campaign contribution was made to a government official in Michigan who had influence over hiring investment advisers for the Michigan Public Employees’ Retirement Fund (the “Michigan Pension Fund”), which was an investor in a fund managed by Obra Capital (the “Obra Fund”). Notably, the Michigan Pension Fund had been an investor in the Obra Fund for several years prior to the hiring of the individual who made the contribution. And perhaps even more notably, this campaign contribution was made several months prior to the individual becoming a “Covered Associate” (as defined by the Rule[2]) of Obra Capital. By virtue of Obra Capital continuing to provide investment advisory services for compensation to the Obra Fund in which the Michigan Pension Fund was invested after hiring the individual, Obra Capital violated the Rule and agreed to pay a $95,000 fine to settle the charges.
Alerts
On Aug. 19, 2024, the US Securities and Exchange Commission (the “SEC”) charged Obra Capital Management, LLC (“Obra Capital”) with violations of Rule 206(4)-5 under the Investment Advisers Act of 1940, otherwise known as the “Pay-to-Play Rule” (the “Rule”), arising out of a $7,150 campaign contribution made by an individual prior to joining Obra Capital.[1] This campaign contribution was made to a government official in Michigan who had influence over hiring investment advisers for the Michigan Public Employees’ Retirement Fund (the “Michigan Pension Fund”), which was an investor in a fund managed by Obra Capital (the “Obra Fund”). Notably, the Michigan Pension Fund had been an investor in the Obra Fund for several years prior to the hiring of the individual who made the contribution. And perhaps even more notably, this campaign contribution was made several months prior to the individual becoming a “Covered Associate” (as defined by the Rule[2]) of Obra Capital. By virtue of Obra Capital continuing to provide investment advisory services for compensation to the Obra Fund in which the Michigan Pension Fund was invested after hiring the individual, Obra Capital violated the Rule and agreed to pay a $95,000 fine to settle the charges.