medium · Debt Capital Markets
In a CLO (Collateralized Loan Obligation), what is the function of the Over-collateralization (OC) test?
- It requires the par value of the loan collateral to exceed the par value of the senior debt tranches.
- It measures whether the pool's interest income covers the senior tranche's interest.
- It limits the amount of CCC-rated assets the manager can buy.
- It determines the management fee paid to the collateral manager.
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