CLOs chasing yield, purchasing second lien bank loans

Second lien bank loans have been more frequently appearing in new CLOs, especially as managers look for higher yielding collateral during this period of historic tights.

Second liens offer between 200 and 500 basis points of pickup over traditional senior secured bank loans, said one CLO collateral manager. Market players have mixed feelings about the trend, especially as some of the first deals to include second liens were differentiating.