medium · Asset-Backed Securities clos
An analyst notices that a CLO's CCC bucket concentration has risen from 5% to 9%.
If the deal's limit is 7.5%, what is the immediate consequence for the collateral manager's trading ability?
- The manager is prohibited from selling any of the existing CCC-rated assets currently held in the portfolio.
- The manager must halt all trading activity entirely until rating agencies formally re-affirm the deal's AAA tranche rating.
- The manager can generally only buy new CCC assets if the purchase improves or maintains the current concentration level.
- The manager must sell enough assets to bring concentration back down to 5% within a strict 30-day cure period.
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