LSTA proposes changes to help CLO issuers comply with Fatca regulation

By Susanna Moon

Chicago, April 18 - The Loan Syndications and Trading Association has proposed language to help issuers of collateralized loan obligations comply with the new U.S. Foreign Account Tax Compliance Act (Fatca) tax regulations.

The LSTA and the Securities Industry and Financial Markets Association proposed a technical amendment to the final rules in a letter to the Internal Revenue Service.

In the letter to the IRS, the industry groups requested that certified deemed-compliant status be available to a "limited life debt investment entity" under Fatca that was in existence as of Dec. 31, 2013.

"There are markets outside of the United States where participants have been waiting for the final Fatca regulations before agreeing to take on any measure of responsibility for Fatca compliance," the letter said.

"Those markets are taking longer to digest and start to implement the regulations than U.S.-oriented markets. Moreover, there are negotiations over IGAs under way in many jurisdictions where special purpose vehicles tend to be formed, which further contributes to the delay in implementation."

The groups also are requesting that the status continue until a limited life debt investment entity liquidates rather than terminating on Jan. 1, 2017, as there are several CLOs that will not liquidate by that date.

The letter contains proposed additions and definitions as well as other changes.

In a separate letter, the industry groups submitted proposed language for inclusion in an intergovernmental agreement between the United States and the Cayman Islands.

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