medium · Asset-Backed Securities clos

In a CLO, what is the role of the 'Reinvestment Criteria' once the deal enters its amortization phase?

1. They permit the manager to redirect interest collections into new loan purchases for an additional two years.
2. They tighten meaningfully to ensure the remaining collateral pool continues to satisfy AAA-level quality metrics.
3. They compel the manager to liquidate all remaining assets and convert the portfolio entirely to cash within six months.
4. They generally cease to be relevant as principal proceeds are passed through to pay down debt rather than being reinvested.

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