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CLO Managers Need to Offload Aging Loans and the Clock Is Ticking

  • Napier, Partners split warehouses in two to print deals
  • Others push out static CLOs, which are funded with less equity
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Money managers bought billions of dollars of leveraged loans in the US and Europe earlier this year, expecting to package them into bonds. Now the value of the debt has dropped, and firms are struggling to find ways to offload it without taking big losses.

Their trouble is critical for Wall Street. These fund managers, the biggest purchasers of leveraged loans, are looking to bundle their current holdings into bonds known as collateralized loan obligations. If they can’t sell the CLOs over the next year or so, their loans may be liquidated, causing a potential flood of selling that could press prices lower in a market that’s already been hit by recession fears. That would roil yet further a funding stream that’s been a critical lifeline for riskier companies and for acquisition financing.