medium · Asset-Backed Securities clos
If a CLO manager is operating during the reinvestment period and the portfolio is failing its Diversity Score test, what is the 'Maintain or Improve' rule's specific requirement for a new trade?
- The new trade must lift the Diversity Score by a minimum of five points to be permitted under the covenant.
- The trade is only permitted if it simultaneously improves both the WARF test and the WAS test alongside diversity.
- The manager must halt all trading in obligor names within industries where concentration is already elevated.
- The new trade must not result in a Diversity Score that is lower than the score immediately prior to the trade.
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