Managers of 2.0-vintage CLOs are quickly increasing second-lien loan holdings to replace their shrinking bond exposure in the unsecured and subordinated strata of their collateralized loan obligation portfolios, according to an analysis from Moody’s Investors Service.

In a quarterly CLO review, Moody’s analysts Shan Lai and Jerry Gluck said CLO 2.0 bond holdings fell to $920.2 million in the first quarter of 2014, a $260 million drop from the second quarter of 2013. Meanwhile, second-lien loan holdings had a nearly corresponding increase of $250 million to $1.12 billion in the same period. 

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