On Feb. 4, Moody's Investors Service revised the methodology it uses to rate CLOs, spurring a rash of CLO downgrades that has yet to end. As a result, CLO managers have begun requesting amendments to their reinvestment periods to relieve the pressure, sources said.

CLO managers are increasingly looking to amend their indentures so that they can access returns made from a tranche before it is downgraded, then reinvest those gains in a better-performing asset. Typically, CLO managers are barred from such action until a tranche reaches its reinvestment period. But with so many of their tranches facing downgrades, and with reinvestment periods a long way off, CLO managers have little choice other than to seek these amendments.

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