CLOs Face Pain From Looming Risk of Leveraged Loan Downgrades
- Around 25% of loan index rated B-, one step from CCC tier
- CLOs could be burdened by CCC loans if there’s a recession
This article is for subscribers only.
There have never been so many leveraged loans on the cusp of the lowest tier of ratings, and the biggest buyers of the debt could be clobbered by any wave of downgrades.
Around a quarter of the loans in the S&P LSTA Leveraged Loan Index are rated B-, the lowest level that many money managers can easily buy. That’s the highest proportion on record, according to Barclays Plc.