Regulations Seen Holding Back CLOs in 2017 Despite Rising Demand

Despite rising demand for floating rate loans, the market for collateralized loan obligations in the U.S. enters the New Year with daunting prospects as a new administration assumes power and risk retention rules take effect. Factors tempering issuance include: difficulty in finding loans at a cheap price, as much of the debt is trading near or above par, potential consolidation of managers and a thin spread between what CLOs pay their investors and what they earn from underlying loans.