Brian Chappatta, Columnist

You Know It’s a CLO Peak When Mom and Pop Show Up

Combine risky leveraged loan pools with unsuspecting investors. What could go wrong?

July 10, 2018 at 12:00 PM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

They usually aren’t the smartest money in the shed.
Photographer: Erika Pontarelli Compart/AFP/Getty Images

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It might be time to call the peak of the collateralized loan obligation boom.

For months, bond investors have lauded the products, which are pools of leveraged loans divided into tranches. “CLOs are our very best idea right now,” Chrystalle Anstett, managing director at Eaton Partners, said in May during a conference in New York’s Times Square that boasted 1,846 registered attendees. No matter that creditor protections are becoming weaker in the underlying loans. Never mind the industry’s explosive growth, which has forced managers to buy whatever is available.