The rating agency said collateralisted loan obligations could be at risk if just a few companies default on their debt
Standard & Poor’s, the rating agency, has flagged another systemic risk that could emerge from the structured debt markets, reports the Financial Times.
About Euro 80bn of debt issued by complex structured loan funds could be at greater risk than investors realise if only a few companies default on their debt, said the FT.
Standard & Poor’s highlighted that many collateralised loan obligations (CLO) have exposure to the same group of borrowers.
The FT said: ‘The default of just one of these widely held borrowers on their debt could have a negative effect on the credit quality of the portfolios of nearly 90 per cent of European CLOs.’
