Rating agency move may boost loan purchases

By Mike Peterson

Friday, March 06, 2009

Moody's today made an announcement which many CLO managers believe could make a dramatic change to their ability to buy and sell loans

Subscriber-only article

This article is available only to Creditflux subscribers and free trial users within 30 days of publication.

Already a subscriber? Not logged in? Click here to login.

If you have not already done so,
you may request a FREE TRIAL by clicking here

This trial will give you:
  • 4-weeks' free online access to our
    most recent subscriber-only articles
  • Daily breaking news alert sent by email
  • A print copy of Creditflux

If you currently have a free trial, you will see this message when you try to view articles older than 30 days.

Comment by: Anonymous. Posted 15 years ago [2009-03-18 13:43:25]

Moodys forced these restrictions on the CLO structure, which AAA investors refuse to amend for existing deals, so the new change in criteria helps no-one except those banks creating new AAA for repo trades. Presumably S&P (which didn't have those restrictions in its criteria) had been winning more of that business ?

Comment by: Anonymous. Posted 15 years ago [2009-03-10 13:25:06]

There was a rationale for carrying deep discount loans at their market price in the o/c test, and so implementing new substitution rule is contrary to the CLO investment structure of buy and hold. This clearly benefits the equity investor and so the equity should be required to give up some of its distributions to build up cushion against future losses

Comment by: Anonymous. Posted 15 years ago [2009-03-09 15:00:56]

Still, this could be a step in the right direction, and with the right scrutiny investors should approve. Many prices are hurt by lack of liquidity, so this could improve the market.

Comment by: Anonymous. Posted 15 years ago [2009-03-09 14:27:43]

This would help deals stay afloat, but the rating agencies cant make the change effective on their own. Once the Rating Agency has agreed to the change in terms of the ratings of the notes, the documentation change must go through the trustee - The trustee is going to ask for a note-holder vote (why would they take the legal risk of not checking with the investors?) and the investors (or more precisely the AAA investors) are going to say no. So the changes to the methodology wont make any practical difference.

Comment by: Anonymous. Posted 15 years ago [2009-03-09 14:25:59]

Unfortunately it's not the agencies which are blocking amendment of par haircuts, but some investors. This is an easy give for Moodys as they know it will only get through for the best managers.

CLOs

more stories...