medium · Asset-Backed Securities clos
If a CLO portfolio's concentration of CCC rated assets exceeds the permitted threshold (typically 7.5%), how is the excess CCC exposure generally treated in the OC test numerator?
- The excess CCC assets are reclassified entirely as defaulted assets for purposes of all portfolio quality tests.
- The excess is valued at the lower of its market value or a specified recovery rate, creating a 'haircut'.
- The par value of the excess CCC assets is entirely removed from the OC numerator calculation.
- The OC test trigger ratios for all senior note classes are automatically increased by 50 basis points.
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