Bonds
CLO Issuers Near Limits on Loan Buying, Squeezing Junk Borrowers
- The securities often face purchase limits after five years
- Result for many junk-rated companies is higher borrowing costs
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Many of the biggest buyers of leveraged loans are facing pressure to cut back on their purchases as they run out of time to reinvest their money, and riskier companies looking for financing could soon be feeling the pain.
The buyers in question are money managers that purchase loans and bundle them into bonds known as collateralized loan obligations. By the end of the year, around 40% of these vehicles will run into time limits on their buying, according to Bank of America Corp.