Oxford Lane Capital Baby Bonds
- Thread starter BMK
- Start date
No, not CDOs
CLOs.
Apparently, there are some important differences.
I just ran across this blog post, published a few days ago, by the Van Eck fund group:
https://www.vaneck.com/us/en/blogs/income-investing/clos-vs-cdos-understanding-the-difference/
They may have a very similar structure, but I'm not sure it's accurate to say that one is a subset of the other. Everything I am reading indicates that there are substantive differences between the two, and that the risks are simply not the same.
The CDOs that collapsed in 2008 were backed exclusively by subprime residential mortgages.
CLOs are something else.
Here's an interesting article published by Schwab a few years ago:
https://www.schwabassetmanagement.c...hy-they-arent-likely-to-topple-banking-system
The CDOs that collapsed in 2008 were backed exclusively by subprime residential mortgages.
CLOs are something else.
Here's an interesting article published by Schwab a few years ago:
https://www.schwabassetmanagement.c...hy-they-arent-likely-to-topple-banking-system
No they are the same structure, under FICC structured credit or structured products desk. Folks are just afraid the bad names these days. CLOs survived because corporate loans have big market, same as with ABS and MBS, no leverages and no swaps, and can’t bet without underlying assets, building blocks of any esoteric products.
Then there were CLNs, CDS, CDO Squad. Nth to Default Swap etc etc, if they ever marketed again, you never can buy in retail.
I know because I was in it, what a trip.
Okay, but in response to my general question in the original post about Oxford Lane baby bonds, you said "don't do it."
Do you think the CLOs held by OXLC are likely to default?
There is a firm in Purchase NY I wouldn’t name, ex-GS, very profitable with this game, all sorts of debt play but just $3b AUM, smart people.
CLOs default rate is the same as any other default rate.
My comment in general is that you don’t need to buy second hand repackaged issues. New corporate loan issues almost every month if you are in this space.
CLOs default rate is the same as any other default rate.
My comment in general is that you don’t need to buy second hand repackaged issues. New corporate loan issues almost every month if you are in this space.
The articles I have cited both say that CLOs do not have the same default rate, or the same risk profile, as CDOs. That doesn't mean they are correct. I have not tried to fact-check these claims. But the default rate is an objective fact, not a matter of opinion.
I would not try to buy a CLO directly. I don't have that kind of capital.
I sometimes buy individual corporate bonds. But that's not the same as investing in something like Oxford Lane Capital.
Just like kmi, he doesn’t want to pay commission, why would you want to pay commission plus management fee.
CLO is just a repackage of individual corporate loans with various credit ratings, average a bit, with subordination features to remove certain default risk. You need to know block and block to see what that Note entails. Thicker the subordination less chance for default for your tranch. But principally loan default risk is certain, manager has nothing to do with loan default, they can only add or remove the default loan from its holding. Someone has to pay for it via price.
Ooh… I thought of a Collateralized Debt Obligation (CDO) as a generic umbrella term for any collateralized obligation; i.e. “CxO.” This would include securities such as a Collateralized Mortgage Obligation (CMO), Collateralized Loan Obligation (CLO), Collateralized Crypto Obligation (CCO), etc.
Thanks for setting me straight.
