medium · Asset-Backed Securities
A CLO manager is in the reinvestment period. A 'CCC-rated' loan in the portfolio is trading at 60 cents on the dollar. The manager wants to sell it and buy a new 'B-rated' loan at 98 cents. However, the 'Class B OC Test' is currently failing.
Can the manager execute this trade?
- Only if the trade improves the OC test results, usually by increasing the total par balance.
- No, all trading is suspended immediately upon any OC test failure.
- Yes, because the reinvestment period allows for unrestricted trading regardless of test status.
- Yes, as long as the new loan is in a different industry than the sold loan.
Sign up free to see the explanation and track your rank →
More Asset-Backed Securities practice
- Which vehicle was specifically created by the Tax Reform Act of 1986 for this asset class?
- What is the most likely tax structure?
- Given the real estate collateral, which tax vehicle is standard for this multi-class trans
- An originator transfers auto loans to a bankruptcy-remote in… — What is the economic purpo
- Under ASC 860, which condition must be met for a transfer of receivables from an originato
- Why does it covenant NOT to incur additional debt?
- A CLO manager is actively buying and selling senior secured… — Which phase of the transact
- An analyst observes that a Non-agency Senior RMBS bond with… — How should the credit decom