CQS CLO Equity

What is a Collateralized Loan Obligation (CLO)?

For illustration only.  
 

What is CLO Equity?

• A CLO is a vehicle backed by a diversified pool of broadly syndicated leveraged loans.
• The CLO raises capital by issuing various tranches of CLO debt and equity.
• Equity investor owns first loss risk and receives cashflows generated from the difference between debt tranche financing cost and income on the loan portfolio.
• The CLO manager underwrites the assets and purchases the underlying portfolio of loans. They then actively trade and reinvest the portfolio during a specified reinvestment period (typically 4.5 – 5 years).
• After the reinvestment period ends, the structure begins to delever through underlying loan repayments.
• The equity investor may elect by majority to refinance and extend the maturity of the structure, allow the portfolio to amortise and/or liquidate the portfolio.
• European Union regulation requires risk retention by the originator/sponsor.

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