medium · Private Credit & Debt underwriting-credit-analysis
A CLO equity investor is evaluating a $500M vehicle with a 9× debt-to-equity leverage.
If the underlying loan portfolio experiences a 2% annual default rate with a 60% recovery rate, what is the approximate reduction in the annual cash yield to the equity tranche?
- 20.0%
- 0.8%
- 1.2%
- 8.0%
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