CLOs Stuffed Full of Private Debt to Risky Companies Are Booming
- Middle-market collateralized loan obligation assets hit record
- Some warn lack of transparency, liquidity puts buyers at risk
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It’s a marriage between two of Wall Street’s hottest products.
Collateralized loan obligations -- typically chock-full of broadly-syndicated debt -- are increasingly being stuffed with private loans made to highly leveraged medium-sized companies with limited access to bank financing. Known as middle-market CLOs, the asset class has ballooned to $57 billion, from just $20 billion six years ago. Five new entrants this year -- including Owl Rock Capital and PennantPark Investment Advisers -- suggest issuance is only set to increase.