The Junk Debt Funds Threatening to Create an $88 Billion Logjam
- A slump in CLO sales may cloud funding for leveraged buyouts
- The funds purchased more than 61 percent of loans last year
This article is for subscribers only.
With debt markets showing the first signs of life in weeks, Wall Street banks are trying to break a logjam that could leave them with big losses on $88 billion of risky corporate loans. They won’t get much help from one of their most reliable buyers.
Collateralized loan obligations, or bonds backed by pooled corporate debt, bought more than 61 percent of the leveraged loans sold last year. This year, CLOs are struggling to get off the ground having raised just $1.2 billion, according to data compiled by Bloomberg, down from $10 billion at the same time in 2015.