CLOs Are Packed With New Loopholes, Triggering Investor Backlash
- CLO managers seek carve outs that boost risk for debt holders
- Rating companies look to keep up with ‘covenant-loose’ deals
Photographer: Spencer Platt/Getty Images
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Allison Salas was taken aback.
As she scanned the latest collateralized loan obligations to cross her desk last spring, tucked into the deal documentation were changes that let the managers of the CLOs swap one distressed loan for another without booking a loss. In other words, they could unload an asset trading at a mere 70 cents on the dollar, buy another troubled loan, and value it at 100.