Each class of owner may receive larger yields in exchange for being the first in line to risk losing money if the businesses fail to repay the loans that a CLO has purchased.
The CLO created a means by which companies with weaker credit ratings could borrow from institutions other than banks, lowering the overall cost of money to them.
[2] The market for U.S. collateralized loan obligations was truly reborn in 2012, however, hitting $55.2 billion, with new-issue CLO volume quadrupling from the previous year, according to data from Royal Bank of Scotland analysts.
Big names such as Barclays, RBS and Nomura launched their first deals since before the credit crisis; and smaller names such as Onex, Valcour, Kramer Van Kirk, and Och Ziff ventured for the first ever time into the CLO market, reflecting the rebounding of market confidence in CLOs as an investment vehicle.
[8] Consequently, CLO issuance slipped to a still-healthy[clarification needed] $97.34 billion in 2015, though it slowed considerably at the tail end of the year, and all but shut down in the early months of 2016, as the leveraged loan market battled investor resistance to risk in general, amid plunging oil prices.