Collateralized loan obligation (CLO)

Collateralized loan obligation (CLO),

Definition of Collateralized loan obligation (CLO):

  1. With a CLO, the investor receives scheduled debt payments from the underlying loans, assuming most of the risk in the event that borrowers default. In exchange for taking on the default risk, the investor is offered greater diversity and the potential for higher-than-average returns. A default is when a borrower fails to make payments on a loan or mortgage for an extended period of time.

  2. Asset backed security (ABS) structure similar to that of a collateralized bond obligation (CBO) but based on a banks portfolio of personal loans instead of bonds.

  3. A collateralized loan obligation (CLO) is a single security backed by a pool of debt. Often these are corporate loans that have a low credit rating or leveraged buyouts made by a private equity firm to take a controlling interest in an existing company. A collateralized loan obligation is similar to a collateralized mortgage obligation (CMO), except that the underlying debt is of a different type and character—a company loan instead of a mortgage.

How to use Collateralized loan obligation (CLO) in a sentence?

  1. A collateralized loan obligation (CLO) is a single security backed by a pool of debt.
  2. CLOs are often corporate loans with low credit ratings or leveraged buyouts made by private equity firms to take a controlling interest in a company.
  3. With a CLO, the investor receives scheduled debt payments from the underlying loans, assuming most of the risk if borrowers default.

Meaning of Collateralized loan obligation (CLO) & Collateralized loan obligation (CLO) Definition