Luxembourg has officially entered the CLO game, with the incorporation of its first CLO vehicle to mark a major milestone for the jurisdiction and potentially paving the way for a diversification of CLO domiciles.

The move follows critical legislative changes introduced in 2022 and 2024; the latter finally resolved a long-standing tax interpretation issue surrounding orphan structures. Previously, Luxembourg’s legal framework lacked clarity around the taxation of such structures, effectively keeping CLO issuers away despite legal reforms passed in 2022. But now, thanks to a new exemption that mirrors Ireland’s ‘single company group type’ model, the door has finally opened.

“We had always seen the potential after the 2022 updates to the Securitisation Act of 2004,” said David Van Gaever, counsel at A&O Shearman Sterling. “But the tax uncertainty was a real blocker. Last year’s legislative fix changed the game.”