Collateralized Loan Obligations (CLOs) are a financial tool used to reallocate credit risk in fixed income markets. They are essentially securities that are backed by a pool of loans usually issued by financial institutions (these are often corporate loans with low credit ratings). In essence, CLOs are comprised of bank loans or these are the basic components of a CLO.
In the case of CLOs, certain types of loans are pooled together and transferred to a “Special Purpose Vehicle.” This vehicle then issues debt that is sold to institutional investors. The money raised is used to acquire or fund the purchase of these loans made to companies that are rated below investment grade This essentially means they have acquired a diversified portfolio of a certain type of secured bank loans – known as senior secured bank loans.
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.
