Collateralized loan obligation (CLO) managers were also buoyed by the overall improvement in ratings profiles. CLOs remained resilient in 2020, but CLO structures—which are created by pooling together non-investment grade loans—were affected by the large-scale downgrades that swept through the market in the spring of 2020.
When ratings quality is diluted beyond pre-set limitations, especially with respect to the proportion of assets with CCC ratings (usually capped at 7.5%), CLOs can face trading restrictions and divert cash flows away from equity and subordinated debt holders in CLO structures.
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.