As oil and gas prices continue to decline, concern is growing about CLOs with exposure to exploration/production and oilfield services companies.

This exposure is generally low; about one in six collateralized loan obligations rated by Moody’s Investors Service have exposures of 5% or more to drillers and oilfield services firms, with most firms averaging 2.69% exposure. Until recently, the impact was limited to holders of the most subordinate tranches of CLOs, which experienced losses in interest income and principal write downs when energy loans backing the deals were downgraded or defaulted.

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