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CLOs Put Pedal to the Metal With Libor Transition Hazard Looming

  • Deals must price next month in order to close by Dec. 31
  • More SOFR-based loans needed to lift CLO issuance next year

The record-setting pace of collateralized loan obligation sales is poised to kick into high gear as issuers get ahead of next year’s potentially messy transition to a new benchmark.

The London interbank offered rate must be retired for new leveraged loans -- the building blocks of CLOs -- by Dec. 31. That’s expected to cause volatility in 2022 as CLOs seek new benchmarks for the loans they repackage and bonds they sell for funding.