Contract analysis
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Contract analysis / indenture-negotiation-issues-list.docx
indenture-negotiation-issues-list.docx
High · 2
Medium · 0
Standard · 5
I. EXECUTIVE SUMMARY AND PURPOSE
High
⚑ Indemnity / guarantee obligation
I. EXECUTIVE SUMMARY AND PURPOSE This memorandum summarizes the open negotiation points on the Indenture (the "Indenture") for Driftwood CLO 2023-I, currently dated for execution on August 22, 2023, among Driftwood CLO 2023-I, Ltd., an exempted company incorporated under the laws of the Cayman Islands (the "Issuer" or "Cayman Issuer"), Driftwood CLO 2023-I, LLC, a Delaware limited liability company (the "Co-Issuer" o
II. TRANSACTION OVERVIEW — KEY STRUCTURAL PARAMETERS FOR REFERENCE
II. TRANSACTION OVERVIEW — KEY STRUCTURAL PARAMETERS FOR REFERENCE The following is a summary of the key structural parameters of the Driftwood CLO 2023-I transaction, provided for the convenience of the deal team in evaluating the negotiation issues discussed herein. These parameters are consistent with the preliminary term sheet circulated to investors by Meridian Atlantic on July 15, 2023, and with the preliminary
III. ISSUE-BY-ISSUE ANALYSIS
High
⚑ Indemnity / guarantee obligation
III. ISSUE-BY-ISSUE ANALYSIS Issue 1: Trading Flexibility During the Reinvestment Period This is a high-priority issue that goes to the core of the Collateral Manager's operational authority under the Indenture. The scope of the Collateral Manager's discretion to buy and sell collateral obligations during the Reinvestment Period is one of the most heavily negotiated provisions in any CLO indenture, as it reflects the
1. Trustee fees and expenses (senior administrative expenses)
Standard
⚑ Commercial term
1. Trustee fees and expenses (senior administrative expenses)
2. Senior Collateral Management Fee (0.15% per annum / $600,000 per year)
Standard
⚑ Commercial term
2. Senior Collateral Management Fee (0.15% per annum / $600,000 per year)
6. O/C and I/C Test waterfall diversion (if applicable)
6. O/C and I/C Test waterfall diversion (if applicable)
9. Subordinate Collateral Management Fee (0.35% per annum / $1,400,000 per year)
Standard
⚑ Commercial term
9. Subordinate Collateral Management Fee (0.35% per annum / $1,400,000 per year)
10. Subordinated Note distributions
10. Subordinated Note distributions
11. Incentive Management Fee (20% of excess above 12% IRR hurdle to subordinated notehold
Standard
⚑ Commercial term
11. Incentive Management Fee (20% of excess above 12% IRR hurdle to subordinated noteholders)
12. Residual distributions to subordinated noteholders
Standard
⚑ Commercial term
12. Residual distributions to subordinated noteholders Under this structure, the Subordinate CMA Fee is positioned after Class D Note interest but before Subordinated Note distributions, which ensures that DCM receives its subordinate fee before equity returns are distributed. 10.2 BLH Markup (Placement Agent's Counsel). Fontaine accepts the placement of the Senior CMA Fee as a senior administrative expense and does