easy · Asset-Backed Securities clos
A CLO receives $5 million because a loan repays early. The reinvestment period is open, and a proposed new loan meets every eligibility test.
Which action best fits the structure?
- distribute the $5 million to equity before all waterfall rules
- use the $5 million to purchase the eligible replacement loan
- increase the repaid borrower’s balance by $5 million
- treat the $5 million as a collateral default
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