CLO Cutbacks Leave Risky Firms Struggling to Refinance Loans

Lower-rated companies looking to refinance loans are running into a serious hurdle: some of their biggest investors are restricted from putting money to work now.

Managers of collateralized loan obligations, or loans packaged into bonds, face a limited period of buying and selling more freely in their portfolio. Usually, they can reset that period, but doing so has been more difficult lately as pricing on the bonds they sell has widened.

Around 40% of CLOs are running up against time limits by the end of this year if spreads on CLO liabilities stay wide, according to a recent report from ...