Pimco Says CLO Losses Will Surpass Those in Prior Cycles

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Pimco Says CLO Losses Will Surpass Those in Prior CyclesThe warning that bundled leveraged loans will be the hardest-hit part of the loan market during the next slump comes as these structured securities face increased scrutiny by regulators. Cumulative leveraged loan default rates in last few cycles were 25% to 30%, with about 70% recovery, MacLean said. “Those losses are going to be borne primarily by CLO equity investors,” MacLean, a bank loan portfolio manager in the Pimco’s Newport Beach office, said in a Bloomberg Radio interview earlier this week.

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