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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TAGS: Europe High yield bonds CLO Distressed debt North America

Comment by: Anonymous. Posted 1 month ago [2020-01-08 15:40:41]

I like CBLOs, though I am not sure if the SF community is ready for a four letter acronym. I don't know why anything else is needed other than "high CCC CLOs".

Comment by: Anonymous. Posted 1 month ago [2020-01-08 10:43:11]

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

Comment by: Anonymous. Posted 1 month ago [2020-01-08 08:37:01]

"CBLOs" & "Opportunistic CLOs" get my vote. They seem the simplest and clearest from all suggestions below.

Comment by: Anonymous. Posted 1 month ago [2020-01-07 22:21:58]

One of the managers who's issued 50% Caa CLOs calls them high investment flexibility or high flex deals. That seems accurate.

Comment by: Anonymous. Posted 1 month ago [2020-01-07 13:50:15]

Triple C-happy and bond-receptive

Comment by: Anonymous. Posted 1 month ago [2020-01-07 13:38:12]

BELLS. Bond Enhanced Leveraged Loan Structures

Comment by: Sayed Kadiri. Posted 1 month ago [2020-01-07 10:35:40]

Ticking Time Bonds? Controversial. We'll file that under 'maybe' for now

Comment by: Anonymous. Posted 1 month ago [2020-01-06 18:00:14]

Ticking Time Bombs

Comment by: Anonymous. Posted 1 month ago [2020-01-06 17:58:46]

CCCLOs

Comment by: Sayed Kadiri. Posted 1 month ago [2020-01-06 16:06:12]

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?

Comment by: Anonymous. Posted 1 month ago [2020-01-06 15:19:50]

Deals with optionality to invest in bonds should be Flex CLOs if bond bucket <50% and Flex CBOs if bond bucket >=50%

Comment by: Tom Davidson. Posted 1 month ago [2020-01-06 14:52:26]

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.

Comment by: Anonymous. Posted 1 month ago [2020-01-06 14:36:14]

CCC-flex CLOs? And high yield -flex CLOs

Comment by: Anonymous. Posted 1 month ago [2020-01-06 14:32:53]

CBLOs & Opportunistic CLOs.

Comment by: Anonymous. Posted 1 month ago [2020-01-06 14:28:02]

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.

Comment by: Sayed Kadiri. Posted 1 month ago [2020-01-06 14:16:38]

Great start! I'd argue that hybrid too generic and could be used to describe various types of CLOs.

Comment by: Anonymous. Posted 1 month ago [2020-01-06 14:11:47]

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.

Comment by: Anonymous. Posted 1 month ago [2020-01-06 14:11:17]

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.

Comment by: Anonymous. Posted 1 month ago [2020-01-06 13:57:02]

Deals with large bond buckets are hybrid structures - feels like a fair name