First European CLOs Fail Key Test Amid Strain of Pandemic Impact
- OC breaches focused on lower rated tranches of four vehicles
- Company earnings could provide a key test for CLO managers
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Cracks have appeared in the defenses of European collateralized loan obligations for the first time since the last financial crisis as portfolios buckle under the strain of the coronavirus pandemic.
Four transactions from three managers, Alcentra, Barings and Bardin Hill, showed a breach of one or more of their so-called over-collateralization tests based on May filings, according to research data from Bank of America Corp. The tests are designed to protect those who buy the less risky portions of the portfolio.