Facing collateral shortage, CLO managers turn to middle market
CLO managers are buying smaller, less liquid middle market loans to boost the spread on offer in their funds, as aggressive repricing in the broadly syndicated loan sector squeezes the arbitrage in the structures.
A relentless wave of refinancing activity in US leveraged loans has turned the screws on the economics of broadly syndicated CLOs this year, with almost 16% of US CLOs rated by Fitch failing their weighted average spread test, according to a report from the rating agency on Thursday.
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