Goldman, JPMorgan Abandon CLO Safeguards as Deal Share Slips
- Banks offer more warehouses that lack collateral triggers
- Pair were last to largely push mark-to-market protections
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Goldman Sachs Group Inc. and JPMorgan Chase & Co. are ditching safeguards on the credit lines they extend to managers of collateralized loan obligations, as they seek to defend their market share in the lucrative business of arranging CLO deals.
The Wall Street behemoths are among the biggest providers of financing facilities known as warehouses, which managers in the $780 billion U.S. CLO market use to buy risky corporate loans before they slice and repackage them into bonds. The pair are increasingly providing credit lines without protections that allow them to demand more cash should the value of the debt plunge before it’s sold to investors, according to people with knowledge of the matter.