The CLO market got off to a rocky start this year, as defaults on leveraged loans started to multiply, sending prices of these assets down sharply and putting many deals at risk of tripping coverage tests. The resulting selloff in collateralized loan obligations themselves, combined with a dearth of new loans, has made it difficult to bring new CLOs to market.

But one of the biggest challenges in putting new deals together, according to Justin Plouffe, managing director of U.S. and European CLOs at The Carlyle Group, has been the decline in the number of buyers of CLO debt.  Plouffe says that this has resulted in “clubbier” transactions that are distributed among a much smaller group of investors than has been the case in recent years. And these investors individually have more power to negotiate deal terms than they would have otherwise.

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