While collapsing market prices do not present immediate worries for CLO managers, the prospect of future downgrades and defaults becomes more problematic.
Prices for major term loans issued by operators such as Marriott International, Hilton Worldwide and Caesars Entertainment have fallen in recent weeks as investors grow worried about the impact of the COVID-19 outbreak on global tourist and business travel.
Banks may be protected from a direct hit, but they have invested in vehicles that include such loans, potentially exposing them to defaults.