The Alchemy of CDO Credit Ratings

Efraim Benmelech and Jennifer Dlugosz

No 14878, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Collateralized Loan Obligations (CLOs) were one of the largest and fastest growing segments of the structured finance market, fueling the 2003-2007 boom in syndicated loans and leveraged buyouts. The credit crisis brought CLO issuance to a halt, and as a result the leveraged loan market dried up. Similar to other structured finance products, investors in CLOs rely heavily on credit rating provided by the rating agencies, yet little is known about CLO rating practices. This paper attempts to fill that gap. Using novel hand-collected data on 3,912 tranches of Collateralized Loan Obligations (CLO) we document the rating practices of CLOs and analyze their existing structures.

JEL-codes: G01 G24 G28 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fmk and nep-ure
Note: CF
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Citations: View citations in EconPapers (99)

Published as Benmelech, Efraim & Dlugosz, Jennifer, 2009. "The alchemy of CDO credit ratings," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 617-634, July.

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Journal Article: The alchemy of CDO credit ratings (2009)
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