The outsized sway of the collateralized loan obligation market’s triple-A investor is no secret—simple math will tell you that the relatively small group of investors buying up what is generally the largest tranche of a CLO transaction will have more power to dictate terms than would be the case if demand for triple-As were broader.

Pet demands vary from investor to investor; market participants say, maybe the buyer likes longer call protection, or has a lower tolerance for covenant-lite loans. One recent example that has popped up in a number of CLO transactions over the last several months is a second triple-A tranche priced with a step-up coupon.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.