medium · Asset-Backed Securities
In a CLO, what is the role of the 'Reinvestment Criteria' once the deal enters its amortization phase?
- They allow the manager to reinvest interest collections into new loans for an additional 2 years.
- They become stricter to ensure the remaining pool quality remains at AAA levels.
- They require the manager to sell all assets and convert the portfolio to cash within 6 months.
- They generally cease to be relevant as principal proceeds are passed through to pay down debt rather than being reinvested.
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