CDOs/CLOs

The Distressed Credit Opportunities Fund III money pool, dubbed Disco III, will target leveraged loans, high-yield bonds and collateralized loan obligations.

According to a new academic research report, CLO managers have taken advantage of S&P's ratings methodology for a ratings boost on lower-rated tranches - enabling them to offer more return for what seemed like less risk.

Moody’s Investors Service has placed hundreds of non-senior U.S. CLO tranches under review for downgrade, affecting 358 broadly syndicated loan-backed portfolios as Moody’s measures the ongoing economic shocks of the coronavirus outbreak.

Analysts and ratings companies are sounding alarms as a number of BDCs rush to shore up finances, or throw lifelines to their heavily indebted borrowers.

Oaktree Capital Management LLC was a “strong buyer” of corporate debt last month during the selloff brought on by the coronavirus pandemic, according to Howard Marks, co-founder of the distressed-investment specialist.

Bank research reports note the loans will only apply to purchases of CLO notes backed by newly issued leveraged loans. Most recently launched deals involve warehoused or distressed secondary-market loans ineligible for TALF.

Fitch expects a majority of European CLO junior notes to be placed on a potential downgrade watch due to enhanced evaluation for coronavirus-related stresses.

In the last two quarters of 2019, according to Fitch Ratings, more U.S. managers of collateralized loan obligations (CLOs) had been structuring some of their transactions to comply with risk-retention rules.

ABS participants saw markets freeze and were bracing for worse when federal aid provide a short-term respite. The question now: How much trust can anyone put in the medium-term and beyond?

For years, regulators have tried to make the financial system safer by blocking banks from taking on the extreme leverage that almost toppled the industry in 2008. Turns out, the risks just moved.