Collateralized loan obligation (CLO)

A security backed by a pool of commercial or personal loans , structured so that there are several classes of bondholders with varying maturities, called tranches. Similar in structure to Collateralized Mortgage Obligations.

Collateralized Loan Obligation

An asset-backed security backed by the receivables on loans. Banks package and sell their receivables on loans to investors in order to reduce the risk coming from loan defaults. Returns on CLOs are paid in tranches; that is, the individual loans backing a CLO have different maturities, and investors are paid out as each matures. Banks offer higher interest rates to investors willing to buy CLOs backed by higher-risk loans. From a bank's perspective, in addition to reducing risk, CLOs also reduce their capital requirements by raising funds through the issue of CLOs. See also: Collateralized mortgage obligation.

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References in periodicals archive

There is a wide range in trustee reported market values for defaulted loans across CLOs with exposure, highlighting the illiquid nature of distressed or defaulted loans held by MM CLOs.

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What makes CLOs better equipped to withstand volatility and risk?

Growing Appetite: Insurers have nearly tripled their collateralized loan obligation holdings since 2012 in the hunt for yield

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Over the last four years, CLOs have become recognized throughout the fleet as the customer order fulfillment focal point for deployed customer sustainment for subsistence, high usage load list, fleet issue load list, aviation ordnanceman deckload, and fleet freight within their respective theaters.

What is a CLO? Combat logistics officers: Improving logistical support to the warfighter

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The US Federal Reserve will give banks two more years to divest collateralized loan obligations (CLOs) that fall under the Volcker rule, a part of the Dodd-Frank financial law that bans banks from making a range of risky investments.

Fed gives banks more time on Volcker rule detail

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