Investor appetite for triple-B CLO notes has been a powerful lever encouraging managers to tweak regular CLO structures to boost the size of this tranche and diverting excess spread to shore up the rating. Colloquially known as ‘Kroll deals’, from the rating agency that rates these issues, some managers have structured tranches as large as $100m to satisfy insurers’ quest for yield. But the structure relies in part on sourcing loans at low prices.
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