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Report: JPMorgan, Citi, BofA looking for ways to arrange new financing for CLO managers

Banks such asJPMorgan Chase & Co.,Citigroup Inc. and are looking forways to arrange new financing for managers of collateralized loan obligations amidso-called risk retention rules that are a part of the Dodd-Frank reform, BloombergNews reported April 13, citing "people with knowledge of the matter."

An option beingexplored is the arrangement of financing for the safest portion of the so-calledvertical-strip, wherein a small part of each portion of the CLO structure is purchasedby a manager.

The report saidthat to comply with the rules that require CLO managers to hold 5% of their deals,the manager of a $500 million CLO might have to put in $25 million without fundingfrom the banks, which is much higher than the $5 million the same manager mighthave to put in if financing for most of the vertical strip is secured.

JPMorgan, Citiand BofA representatives did not comment, according to Bloomberg.