Market participants are hopeful the development of the leveraged loan credit-default swap market will not cause the pipeline for cash collateralized loan obligations to dry up. There has been concern CLOs could die out, in the same way investment-grade cash collateralized debt obligations stalled when synthetic CDOs issuance took off.
But, some argued high-yield CLOs are different because managers that have proven exceptional credit analysis skills for high-yield risk are at a premium and will continue to be in demand. "Cash CLOS won't go away, both can co-exist," said Sivan Mahadevan, head of credit derivatives and structured credit research at Morgan Stanley.
