What is a CLO?
Core concepts
Collateralised loan obligations (CLO) are complex, high-value transactions involving numerous parties, extensive documentation and, usually, several jurisdictions. A CLO transaction involves an issuer (an orphan company or special purpose vehicle (SPV)) issuing newly created structured finance instruments (being debt securities in the form of bonds or notes and referred to in this guide as “CLO securities”). The CLO securities are:
- Divided into several classes or tranches of varying size, credit rating and priority ranking (categorised as senior, mezzanine, junior or subordinated).
- Funded by and secured over a portfolio of financial assets consisting of primarily senior secured loans alongside other types of loans (for example unsecured senior loans, mezzanine loans and second lien loans) and, in some cases, bonds (including senior secured bonds, unsecured senior bonds, mezzanine bonds and high yield bonds) acquired by the SPV.
Volta Finance Limited (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.
