What Is a Collateralized Loan Obligation (CLO)?

A collateralized loan obligation (CLO) is a single security backed by a pool of debt. The process of pooling assets into a marketable security is called securitization. Collateralized loan obligations (CLO) are often backed by corporate loans with low credit ratings or loans taken out by private equity firms to conduct leveraged buyouts. A collateralized loan obligation is similar to a 佛山照明子公司破产清算申请获许 佛照2016年业绩影响较小 (CMO), except that the underlying debt is of a different type and character—a company loan instead of a mortgage.

With a CLO, the investor receives scheduled debt payments from the underlying loans, assuming most of the risk in the event that borrowers default. In exchange for taking on the default risk, the investor is offered greater diversity and the potential for higher-than-average returns. A default is when a borrower fails to make payments on a loan or mortgage for an extended period of time.

1:27

Collateralized Loan Obligation (CLO)

How Collateralized Loan Obligations (CLO) Work

Loans—usually first-lien bank loans to businesses—that are ranked below investment grade are initially sold to a CLO manager who bundles multiple (generally 100 to 225) loans together and manages the consolidations, actively buying and selling loans. To fund the purchase of new debt, the CLO manager sells stakes in the CLO to outside investors in a structure called tranches. Each tranche is a piece of the CLO, and it dictates who will be paid out first when the underlying loan payments are made. It also dictates the risk associated with the investment since investors who are paid last have a higher risk of default from the underlying loans. Investors who are paid out first have lower overall risk, but they receive smaller interest payments, as a result. Investors who are in later tranches may be paid last, but the interest payments are higher to compensate for the risk.

Key Takeaways

  • 其次,麦克德莫特是一名职业生涯三分命中率39.9%的投手,解决了雷霆阵容最大的一块短板——拉塞尔-威斯布鲁克周围缺乏投手,而且他直到下个赛季结束都是便宜的新秀合同。
  • 这是自去年9月以来进口最大单月跌幅,也意味着中国进口已在过去15个月里连续同比收缩。
    The estimates include earnings from movies, TV and endorsements from cosmetic and other companies. Bollywood star Deepika Padukone is the only newcomer on the list.
  • capacity
    冷空气是被一个名为高空急流的气流循环带到美国本土的内部,这让北极的冷空气南下。但是,一个抵消这种冷空气的怪现象,让异常温暖的热带空气停留在西部地区、阿拉斯加大部分地区以及北极大部分地区的上空。

There are two types of tranches: debt tranches and equity tranches. Debt tranches are treated just like bonds and have credit ratings and coupon payments. These debt tranches are always in the front of the line in terms of repayment, although within the debt tranches, there is also a pecking order. Equity tranches do not have credit ratings and are paid out after all debt tranches. Equity tranches are rarely paid a cash flow but do offer ownership in the CLO itself in the event of a sale.

Jennifer Lawrence also took home the gong for best actress in a movie for her role in the critical darling Joy.
Only two people know the Oscars winners list and supervise the counting procedures - PwC tax adviser Martha Ruiz and Brian Cullinan an accountant.
n. (复数)细菌
注册营养师艾利克斯?图鲁夫称:“糖屑中含有糖分,而金片与此不同,它不含碳水化合物、脂肪或蛋白质,所以不能提供热量,没有味道,主要用于装饰。”
7.M·A·S·H Star Never Signed his Contract

显然相信“更长时间保持较低位”如今意味着“永远保持较低位”的投资者,最近几周已经涌向新兴市场资产。

Special Considerations for CLOs

Some argue that a CLO isn't that risky. A study by Guggenheim Investments, an asset management firm, found that from 1994 to 2013, CLOs experienced significantly lower default rates than corporate bonds. Even so, they are sophisticated investments, and typically, only large institutional investors purchase tranches in a CLO. In other words, companies of scale, such as insurance companies, quickly purchase senior level debt tranches to ensure low risk and steady cash flow. Mutual funds and ETFs normally purchase junior-level debt tranches with higher risk and higher interest payments. If an individual investor invests in a mutual fund with junior debt tranches, that investor takes on the proportional risk of default.