Buyers and managers of collateralized loan obligations are seeking to overcome the roadblocks that can immobilize them in distressed situations that also draw opportunistic hedge funds, Bloomberg reported. Hildene Capital Management, a structured-finance investor that oversees more than $12 billion, is establishing special purpose vehicles alongside CLOs that can buy new workout loans and equity stakes in troubled holdings. The goal is to profit from the rescue financing while splitting any additional recovery with its CLO partners. Separately, some collateral managers are turning to amendments that allow them to take in fresh cash from either equity holders or third-party investors to acquire restructured assets. The $860 billion global CLO market is racing to find ways to give managers more flexibility in distressed situations as safeguards intended to protect buyers in the top-rated parts of the structures limit managers’ options in high-stakes restructuring brawls. CLOs typically need to get consent from most or all investors before eliminating those protections, which often isn’t feasible.
