‘Vacuum cleaner’ CLOs blamed for deteriorating US loan conditions

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By David Bell
14 Dec 2017

US leveraged finance sources have blamed a rampant CLO market for allowing borrowers to run riot in the leveraged loan market with loose covenants and declining underwriting standards, trends that look likely to escalate if leveraged lending guidelines are rolled back, writes David Bell.

Rampant demand from securitization investors for CLO debt is fuelling an erosion of investor protections in new leveraged loans and CLO structures, according to sources. 

Appetite for the yieldy asset class is encouraging CLO managers to churn out paper at a tear, but this is encouraging an erosion ...

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