CLO Market Poised to Freeze, Raising Risk to Leveraged Loans (1)

The biggest buyers of leveraged loans are getting pushed to the sidelines, which is set to make it harder for riskier companies to tap the $1.4 trillion market for such debt.

Money managers are poised to dramatically slow new issuance of collateralized loan obligations, which buy and pool buyout debt, in the coming weeks, according to Goldman Sachs Group Inc. and Morgan Stanley analysts. That’s because a large selloff of such securities has enticed investors to buy what’s already out there and pressured CLO issuers to ramp up pricing.

Wall Street banks have been trying to sell leveraged loans they ...