Collateralized loan obligation


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Related to Collateralized loan obligation: Collateralized debt obligation

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.
References in periodicals archive ?
Trumbull is a synthetic collateralized loan obligation (CLO) that closed on May 6, 2003 and provides investors leveraged exposure to a diversified portfolio of high-yield loans utilizing a total rate of return swap with Citibank, N.
ELF II is a synthetic collateralized loan obligation (CLO) established on July 27, 2000 that enables investors to gain exposure to the economics of a reference loan portfolio via a total return swap between the trust and Swiss Re Financial Products, a wholly owned subsidiary of Swiss Reinsurance Company, on a leveraged basis.
BOSS Cayman is a synthetic collateralized loan obligation (CLO) that provides investors with leveraged exposure to a diversified portfolio of high yield loans.