A CDO is a distinct legal
entity, usually incorporated in the Cayman Islands. Its liabilities are called CDOs, so one might hear the
seemingly circular phrase ‘the CDO issues CDOs.’ Offshore incorporation enables the CDO to more easily
sell its obligations to United States and international investors and escape taxation at the corporate entity
level. When a CDO is located outside the U.S., it will typically also have a Delaware co issuer. This entity
has a passive role, but its existence in the structure allows CDO obligations to be more easily sold to U.S.
insurance companies.