CLOs are increasingly negotiating with investors for longer reinvestment periods. S&P Global takes a less favorable view of the practice than the other two major rating agencies, Fitch Ratings and Moody’s Investors Service.
Most collateralized loan obligations issued since the financial crisis have the ability to actively manage their portfolios, selling existing holdings and acquiring new loans, for four years. However many CLOs issued this year have longer reinvestment periods. By S&P’s count, nearly half (45%) can actively manage their portfolios for longer than 4.5 years. A significant number can reinvest for five years. Two have six-year reinvestment periods.