The jurisdiction has also been ‘whitelisted’ for both OECD and EU tax transparency and economic substance compliance. In addition, changes to streamline the Jersey prospectus rules so that they more closely reflect the regimes in the UK and across Europe took effect from October 2021.
For these reasons, Jersey remains one of the world’s leading international capital market jurisdictions. As such, the use of Jersey entities and special purpose vehicles (SPVs) has remained common, offering flexible products appropriate for the investor base and target audience. While partnerships, cell companies and trusts are all options, incorporated companies remain the vehicle of choice across a broad range of products, including securitisation structures, notes programmes, listed corporate entities and the like.
COLLATERALISED LOAN OBLIGATIONS (CLOs)
In many ways, the market has continued as normal throughout the pandemic but it is impossible to discuss 2022 without reference to CLOs.
While this represents a small fraction of the overall market – and this ‘trend’ may be reversed by the end of the year – the influx of deals shifting to Jersey at the start of the year was marked.
By way of background, following the addition of the Cayman Islands to an EU AML high-risk list in early 2022, certain EU Risk Retention compliant CLOs needed to move from the Cayman Islands to an alternative jurisdiction, Jersey being a favoured one.
As noted, this issue may exist for a short time and only applies to deals with EU investors. However, that aside, the months of March and April of 2022 were a busy time in Jersey, with several migrations of existing issuers into the jurisdiction and the origination of a significant number of new deals.
Since then, there has been a general slowdown in the United States’ CLO market (and consequently in Jersey), given the macro conditions and a tougher environment to price, primarily due to rising interest rates and inflation. However – and despite the slowdown from the fast-paced start to the year – a steady flow of this new product into the Jersey market continues.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Alongside all of this, the US market has also seen the transition in benchmark reference rates in CLO deals from the London inter-bank offer rate (LIBOR) to the new Secured Overnight Financing Rate (SOFR) and a rise in ESG CLOs.
While not all about CLOs, or even ESG in CLOs, the long history of ESG featuring in European (and increasingly US) structured finance markets continues, with a shift in the ESG focus across most products. This is not unique to this area of financing but is notable in its continued relevance.
THE INTERNATIONAL STOCK EXCHANGE (TISE)
Away from CLOs, TISE has continued its success story of 2021, following a record-breaking year for new listings. This theme continued throughout Q1 2022 as a preferred exchange for
many types of listing and the benefits of the new simplified and streamlined requirements taking effect in July 2022 being seen.
The ESG theme is also relevant here, as TISE is a Partner Exchange of the United Nation’s Sustainable Stock Exchanges (SSE) initiative, encouraging sustainable investment strategies and allowing any TISE-listed issuers to qualify and showcase their ESG credentials via assessments against internationally recognised standards and publicly available sustainable reporting and disclosure.
Like many markets, this area is very much a wait and see, whilst market confidence remains a key driver. Plus, as the threats of the pandemic seem to be (mostly) behind us, the impact of other macro issues is yet to be seen. Watch this space…