CLO equity liquidations often return just 40 to 50 cents on the dollar
Shiloh Bates · Shiloh Bates – CLO Investing at Flat Rock Global (EP.379) · Apr 11, 2024 · at 38:16
Shiloh Bates, Chief Investment Officer at Flat Rock Global, explains why CLO cash-flow modeling requires exact precision compared to direct first-lien loan underwriting.
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“There's no par payout at the end. A lot of times you're getting back 40 cents, 50 cents on the dollar. Now, over the eight-year life of the CLO, you've got these very large distributions along the way. Hopefully it nets to a nice return for you, but you don't get par back at the end. So the modeling of it really needs to be a hundred percent accurate because every dollar is going to be part of that IRR. There's no magical hundred cents that comes back to you at the end.”
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