On Wednesday, February 24th, Meredith Coffey, EVP of the Loan Syndications and Trading Association, testified before the House Financial Services Subcommittee on Capital Markets. The point of her testimony was four-fold: i) To explain the importance of loans to non-investment grade companies, ii) to explain the role CLOs play in this financing, iii) to explain what risk retention could do to CLOs, and iv) to describe a viable form of retention (H.R. 4166, or the “QCLO bill”) that should work for lawmakers, regulators, CLOs and companies.
Meredith developed the following summary of her testimony for our Lead Left readers:
The reality is that the vast majority of American companies are not large investment grade corporations like Microsoft, McDonalds and Wal-Mart. Most are non-investment grade – of the 2,000 companies Moody’s rates, more than 70% are rated below Baa3. These are cable companies like Cablevision, airlines like Delta and American, food companies like Dole and Del Monte, restaurant chains like Wendy’s, Burger King and Dunkin Donuts, and – to burn those donuts off – gym companies like 24-Hour Fitness and Equinox.