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Wall Street Props CLO Boom as Rules Lift Costs: Credit Markets

The biggest year for collateralized loan obligations since 2007 is being propped up by deals managed by Blackstone Group LP and Carlyle Group LP, which started funds that pledge to boost interest rates to entice buyers.

While $87 billion of CLOs have been issued globally this year based on JPMorgan Chase & Co. data, coupons on the highest-rated portions have risen to as much as 1.5 percentage points over the benchmark from at least a three-year low of 1.1 percentage points in May. Yields rose as GSO Capital Partners LP, the credit arm of Blackstone, Carlyle and other money managers sold at least $4.5 billion of CLOs with the promise of higher interest payments, typically after 18 months.