2007 US CLO bulks up its equity tranche by $17.5 million

By Sayed Kadiri

Thursday, December 22, 2011

A 2007 US CLO has up-sized its equity tranche

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Comment by: Anonymous. Posted 12 years ago [2011-12-22 22:56:23]

Fascinating - this interesting article raises a few questions. The $17.5 million equity raised must be par value rather than actual paid-in capital given that the best bid for the equity in the secondary market was less than 50% of par. Do the rating agencies know only to "count" the paid-in cash rather than the larger par amount? (Don't say "yes" too quickly.) Also, if the CLO has a large cash hoard because it is restricted in its reinvestments, the cash flow to the equity should be weak. Why add more equity, then? Is there inside knowledge of some sort that the CLO manager will negotiate changes to the docs soon?

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