collateralized loan obligation
- collateralized loan obligation
Also referred to as CLO. Structured finance instruments (being debt securities (debt security) in the form of bonds or notes) which are backed, that is funded by and secured over, a portfolio of loans.
+ collateralized loan obligation (CLO)
A type of debt security, typically issued by a special purpose entity, created to securitize large pools of corporate loans (other than mortgages). The CLO issuer will hold and manage several tranches of loans grouped by credit rating; with each tranche having the right to the collateral and payment stream of the underlying loans in descending order (lower rated tranches hold increasingly subordinated rights to the collateral and payment stream).
CLOs allow banks to remove the loans from their balance sheets, reduce regulatory capital requirements and improve their return on capital. CLOs are major institutional investors in the leveraged loan market.
Practical Law Dictionary. Glossary of UK, US and international legal terms.
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Collateralized loan obligation — Collateralized loan obligations (CLOs) are a form of securitization where payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches. A CLO is a type of… … Wikipedia
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collateralized loan obligation — noun a form of securitization where payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches … Wiktionary
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