European collateralized loan obligations issued before the financial crisis are nearing the end of their reinvestment periods. Yet the maturities of their holdings continue to shift further out into the future, in part because the term of these loans are being amended and extended.

This creates potential risks for CLO investors, according to Standard & Poor’s. In a report published May 14, the rating agency said CLO noteholders may have to wait longer to get their principal back. They may also have to accept lower returns if CLO managers sell the loans in the secondary market to repay the note principal.

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