2012•Unpublished venueRequires access

European Bank Loans and Middle Market Loans

Douglas J. Lucas, Laurie S. Goodman, Frank J. Fabozzi

Abstract

This chapter reviews the features of two types of loans found in collateralized loan obligations (CLOs): European bank loans (specifically, European high-yield syndicated loans) and middle market loans. It is revealed that in substituting MMLs for large loans, CLO equity holders care about the after-default spread of one versus the other. MML obligors have lower total leverage ratios and higher senior debt ratios than large loan obligors. The credit quality of MMLs in a particular CLO depends upon the risk appetite and credit skills of that particular CLO manager.

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Key concepts: Loan, Credit default swap, Leverage (statistics), Business, Financial system, Debt, Equity (law), Collateralized debt obligation