By Natasha Chen, vice president/senior analyst, Moody's Investors Service

Increasingly, CDO managers seek the flexibility to continue reinvesting after the reinvestment period has ended. Reinvestment is generally limited to unscheduled principal proceeds, as well as proceeds from the sale of credit-improved and credit-risk securities. Moody's is concerned that credit risk posed to the rated noteholders that was not contemplated in the original modeling of expected losses may be introduced to the transaction as a result of this practice.

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.