In the next two years, around USD50 billion collateralized loan obligations (CLO) could be refinanced. According to the Royal Bank of Scotland Group Plc (RBS), this would be the reward for holders at the expense of its AAA investors.
This year, more than USD2 billion of collateralized loan obligations were refinanced by BlackRock Inc., Ares Management LLC and other firms. An additional USD8 billion CLO that was sold in 2011 would be able to cut interest payments by the end of this year, said RBS. The bank added, restrictions that prevented more than USD40 billion of 2012 investments from doing the same would be lifted by 2014.
In at least three years, yield premiums on new-issue CLOs decreased to its lowest levels. This was after more investors piled into the debt seeking better returns that asset classes that are similarly rated. This year, the rising demand aided CLO issuance to USD60.6 billion worldwide.
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