What does CLO stand for in finance?
A collateralized loan obligation (CLO) is a securitization product created to acquire and manage a pool of leveraged loans. CLOs issue multiple debt tranches along with equity and use the proceeds from the issuance to obtain a diverse pool of syndicated bank loans.
What is a CLO entity?
CLO Entity means, as of any date, any corporation or limited liability company, limited partnership or similar entity the value of the assets of which is principally attributable to cash, Bank Loans, Bank Loan Participations and other income-producing debt instruments.
Is a CLO an investment company?
Since loans fall within the definition of “securities” for many federal securities law purposes, a CLO issuer could be viewed as an investment company subject to the 1940 Act if an exemption were not available.
What is a CLO issuer?
CLO Issuer an Affiliate of the Parent Borrower that is consolidated with the Parent Borrower for financial reporting purposes under GAAP and issues asset-backed securities commonly referred to as “collateralized loan obligations” or “collateralized debt obligations” comprised of Commercial Real Estate Debt Investments …
How are CLOs taxed?
The taxation of CLO securities is tied to the CLO tranche structure. In most CLOs, all but the most subordinated securities are treated as debt for tax purposes (in this Insight, the term for such securities, Senior Notes, includes senior, mezzanine, and junior CLO tranches).
Are CLOs publicly traded?
Private firms also manage CLOs and typically buy debt to create one. Currently, there are three publicly traded CLO funds. All invest over 90% in equity tranches, and they are: Oxford Lane Capital (OXLC) – Yield 16.5%
How does a CLO make money?
CLOs are funded by layers of debt of varying seniority and equity. The principal and interest received from the portfolio of senior secured loans is distributed according to a cash flow waterfall.
How are CLOs rated?
Some CLOs consist predominantly of middle market loans as the underlying collateral. The average rating of the underlying collateral is typically about single-B, and the leveraged bank loans are typically floating rate, based on LIBOR.
How are CLOs funded?
The portfolio of loans is selected by a collateral or CLO manager, who actively buys and sells loans based on their overall attractiveness and diversification. The CLO finances this pool of loans with privately placed rated debt and equity, providing investors with market levels of return.