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Review: The Reset of Anchorage Capital CLO 7

The reset of Anchorage Capital CLO 7, managed by Anchorage Capital, was quite interesting in a number of ways. Its equity NAV was low (though in line with its peers for the same semi-annual vintage) before the reset, given that this deal was issued almost 9 years ago. Typically, a combination of a class X tranche and/or an injection of equity would be needed. If the deal were liquidated instead of reset, its equity IRR would register around 12%, assuming a par issue price. The decision to reset rather than redeem or sell the equity tranche on the secondary market suggests that this reset is accretive and more lucrative than a full redemption or sale.

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