Feb 15, 2012
- Graham Bippart
CLOs And Chuck Norris: Both Built To Survive
Collateralized loan obligations are tough enough to withstand twice the default levels seen in economic crisis beginning in 2008, and some new-issue CLOs could even withstand more, according to Royal Bank of Scotland research.
If defaults on underlying loans were to reach the same levels seen from 2008-2011, median equity cash-on-cash return from CLOs originated between 2005 and 2007 would still be 114%, with none of the notes from sampled deals taking any principal loss, director Justin Pauley found. Under an unlikely scenario in which defaults surged to twice the crisis levels, only 9% of the most....