CLOs escape cov-lite stricture by borrowing from revolvers

By Owen Sanderson
17 Feb 2020

Although European CLOs have a standard limit on the proportion of covenant-lite loans they buy, the definition of ‘cov-lite’ means that almost every term loan with a revolving credit facility elsewhere in the capital structure remains eligible for purchase by these vehicles.

New CLOs this year from Partners Group, Investcorp, and a deal announced on Friday for PGIM have a limit suggesting that a maximum of 30% of the portfolio can be invested in covenant-lite instruments.

Most CLOs have similar limits, placing restrictions on the proportions of second lien investments, ...

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