Define finance traunche8/24/2023 ![]() Understanding CLO Collateral: Leveraged LoansĪ portfolio of loans act as the collateral supporting a CLO. Economically, the CLO equity investor is the owner of the pool of loans and the CLO debt investors provide term financing to acquire the pool of loans. These loans, also known as “bank loans” or “leveraged loans,” typically occupy a first-lien position in the company’s capital structure, are secured by the company’s assets, and rank first in priority of payment ahead of unsecured debt in the event of bankruptcy. The debt issued by CLOs consists of a variety of tranches, each with a risk/return profile based on its seniority and claim priority on the cash flows produced by the underlying loan pool. CLOs derive principal and interest from an actively managed, diversified pool of non-investment grade, senior-secured corporate loans.ĬLOs use funds received from the issuance of debt and equity to investors to acquire a diverse portfolio of typically more than 200 loans. ![]() Guggenheim Investments' long-term experience mobilizing credit research, structural analysis, analytic infrastructure, and legal expertise in service of our investment process positions us to capture the attractive relative and fundamental value in CLOs though a cycle.ĬLOs are a $910 billion asset class within the broader $12 trillion structured credit fixed-income market 1, which also includes asset-backed securities (ABS). Guggenheim Investments' long-term experience mobilizing credit research, structural analysis, analytic infrastructure, and legal expertise in service of our investment process positions us to capture the attractive relative and fundamental value in CLOs though a cycle.Credit performance through the Great Financial Crisis (GFC) and COVID-19 risk cycles has supported growth in the CLO market, broadened the investor base, and supported secondary market liquidity.Collateralized Loan Obligations (CLOs) represent a high yielding, scalable, floating-rate investment alternative with a history of stable credit performance.
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