medium · Private Credit documentation-covenants-terms
A CLO equity investor is analyzing a pool of $500M in loans. The rated debt tranches have a weighted average cost of SOFR + 200 bps. The loan pool yields SOFR + 450 bps.
If the equity tranche is $50M (10% of capital), what is the 'Cash-on-Cash' yield before defaults?
- 15.0%
- 7.5%
- 4.5%
- 27.0%
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