CLOs are the new CDOs of '08.

[hhiusa]

Still, the two Trump-appointed officials appear to be less worried about leveraged-lending risk than their predecessors, who several years ago were wrestling with banks over underwriting standards.

Banks often sell leveraged loans to CLOs, which in turn are owned by investors such as hedge funds and pension funds. Issuance of CLOs has been setting records this year.

The company [Cirque du Soleil] is among thousands of businesses whose loans have been packaged with similarly risky, junk-rated debts into funds, which were then sold to investors globally.

So the principle in 2008 was to bundle a few good mortgages with lots of bad mortgages and sell the debt as CDOs. What is old is new again. CLOs may not be that new, but they have experienced a huge uptick in interest.

 

[cdcaveman]

You do realize mixing risk together is called diversification....

 

[hhiusa]

You do realize mixing risk together is called diversification....

Diversifying s$%^ is stil sh%#.