CLO Machine Slows as Steep Price Moves Weigh on New Sales

The biggest buyers of leveraged buyout loans have been much less active this year, which is making it harder for banks to offload the debt.

Money managers that buy leveraged loans and bundle them into collateralized loan obligations have sold about 21% fewer of the bonds in 2021 compared with the same period last year. Volume is dropping because prices for both the loans CLOs buy and the bonds they sell have fluctuated wildly in recent days, making the potential profit on any CLO that’s sold unpredictable.

“The challenge is volatility, which is never good for CLO creation,” said ...