FT: Wobbles in collateralised loan obligations pose problems for lenders

Lenders on both sides of the Atlantic have upwards of 100 open credit lines to vehicles known as collateralised loan obligations, which are among the biggest sources of funds for businesses that do not have top-quality credit ratings, according to people familiar with the arrangements.

Funds such as the debt-investing arms of private equity powerhouses Blackstone and Carlyle are the biggest managers of these CLOs, which have made great strides since the last financial crisis as traditional lenders retreated from making riskier loans.

Investment banks still have exposure, however, as they provide so-called “warehouse lines” to CLO managers that help them build portfolios of loans. Such assets have plummeted in value this month, due to growing doubts over the ability of heavily indebted companies to withstand big hits to the economy.

The full article is available at https://www.ft.com/content/49ee0c64-cd97-4342-9f03-fec019963fef

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