Collateralized Loan Obligation
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A collateralized loan obligation (CLO) is an interest-bearing security . These are securitisations that are covered by secured loans; these are usually managed by a special purpose vehicle (SPV).
history
The first collateralized loan obligation (CLO) were in the United States in 1992 emitted .
functionality
Credit managers (usually banks) compose CLOs from loans. These include between 100 and 200 loans, typically corporate loans from different industries. A credit institution is responsible as trustee ( Trustee ) the settlement of corporate loans (collateral, cash flows , documentation), drawing up a comprehensive monthly report that approaching investors. The compiled loan portfolios are divided into different classes (A to equity) and rated by at least one rating agency. These respective unit classes are mostly issued as listed securities. The interest rate , which can be a fixed rate or a variable rate, depends on the risk assessment.
Basically, the same risks exist here that led to high losses in the area of CDOs in the context of the mortgage crisis in the United States of America .