Assessing the Performance of Equity Tranches in Reset US CLO Deals (Updated)
August 18, 2023
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In essence, resetting a deal extends the total reinvestment period, which is positive from an equity standpoint. If a CLO deal can generate an annual equity distribution of 13–14 points over a period of 8–11 years, its equity is likely to perform reasonably well, even if its final equity NAV is poor. It’s worth noting that most of the seasoned reset deals were active during a period of very low-interest rates.
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