We need to talk about high triple C/bond-heavy CLOs
It’s tranched, has exposure to corporate credit and looks and behaves a lot like a CLO – only it’s slightly different. There is so much variety in the CLO market that the industry is faced with a dicey problem: how do we differentiate between the different flavours of CLOs?
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I'm no lexicologist, and maybe I'm overthinking things, but opportunistic CLOs could apply to any CLO really. They're all being set up capture an opportunity. And looking ahead, there's likely to be a branch of CLOs that's even more opportunistic that the CCC-CLOs we're seeing today, so we'd need to future-proof against that. I'm definitely overthinking things
"CBLOs" & "Opportunistic CLOs" get my vote. They seem the simplest and clearest from all suggestions below.
One of the managers who's issued 50% Caa CLOs calls them high investment flexibility or high flex deals. That seems accurate.
Triple C-happy and bond-receptive
BELLS. Bond Enhanced Leveraged Loan Structures
Ticking Time Bonds? Controversial. We'll file that under 'maybe' for now
Ticking Time Bombs
CCCLOs
The "Flex" argument is compelling. It makes clear what the transaction is and can be extended to adjacent products. Maybe we will see CSOs branded as CDS-flex CLOs?
Deals with optionality to invest in bonds should be Flex CLOs if bond bucket <50% and Flex CBOs if bond bucket >=50%
I think high yield CLO is potentially misleading for less sophisticated investors. Vanilla CLOs still invest in HY loans after all, so you should really call them all HY CLOs. I like Opportunistic CLOs much more.
CCC-flex CLOs? And high yield -flex CLOs
CBLOs & Opportunistic CLOs.
CLOs with large bond buckets, including most European CLOs, should be called CDOs. But since we’re not going to do that, we should probably just call all of them CLOs and accept that there are important differences in collateral quality restrictions.
Great start! I'd argue that hybrid too generic and could be used to describe various types of CLOs.
Agree with that comment - Hybrid CLOs. There is a varied % of CCCs - seen limits ranging from 20%, 25% to 50%. Also some are mixing higher CCC limits with certain CBO features missing in traditional CLOs.
I'd vote for Hybrid CLO's for the bond / loan combo and High Yield CLO's for those with an above average proportion of CCC loans.
Deals with large bond buckets are hybrid structures - feels like a fair name
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Comment by: Anonymous. Posted 4 years ago [2020-01-08 15:40:41]