What is a CLO? 

July 01, 2021

Learn more about this securitization product created to acquire and manage a pool of leveraged loans.


A collateralized loan obligation (CLO) is a securitization product created to acquire and manage a pool of leveraged loans. CLOs issue multiple debt tranches along with equity and use the proceeds from the issuance to obtain a diverse pool of syndicated bank loans. Interest and principal cash flows generated from the underlying collateral pool flow through the CLO and are distributed to debt and equity investors. Each debt tranche carries a different risk/return profile based on credit quality, risk of loss and priority to cash flow distributions. Structural features of the CLO, including coverage, diversification and exposure tests, dictate cash flow mechanics and further add to the risk/return profile.

Investment options range from AAA-rated debt tranches to non-rated equity. Banks, asset managers, insurance companies, pension funds, mutual funds, hedge funds and high net worth individuals are active investors in the CLO market and are attracted to the variety of risk/return options.

Given the complexities of the CLO structure and nuances of the bank loan asset class, it is helpful to partner with an experienced service provider.


To learn more about bank loan and CLO services offered at U.S. Bank, please contact business development officers Mike Oliver at 312-332-6927 or Mike Zak at 651-466-5070.

Related content

When small companies buy big: The potential of asset-based lending

How to maximise your infrastructure finance project

Evaluating interest rate risk creating risk management strategy

What is CSDR, and how will you be affected?

Everything you need to know about consolidating debts

Take the stress out of buying your teen a car

How I did it: Deciding whether to buy an RV

Questions to ask before buying a car

What you should know about buying a car

How to choose the best car loan for you

What you need to know before buying a new or used car

Can you take advantage of the dead equity in your home?

How to get started creating your business plan

How to fund your business without using 401(k) savings

Opening a business on a budget during COVID-19

Costs to consider when starting a business

How to establish your business credit score

When to consider switching banks for your business

How jumbo loans can help home buyers and your builder business

How a small business is moving forward during COVID-19

Prioritizing payroll during the COVID-19 pandemic

5 tips to help you land a small business loan

Investing in capital expenditures: What to discuss with key partners

Can ABL options fuel your business — and keep it running?

Collateral options for ABL: What’s eligible, what’s not?

Beyond Mars, AeroVironment’s earthly expansion fueled by U.S. Bank

4 questions you should ask about your custodian

Tech lifecycle refresh: A tale of two philosophies

At your service: Outsourcing loan agency work

Tailor Ridge eBill case study

Middle-market direct lending: Obstacles and opportunities

4 reasons to consider an independent loan agent

Maximizing your infrastructure finance project with a full suite trustee and agent

What is a CLO?

An investor’s guide to marketplace lending

Bank vs. brokerage custody

ABL mythbusters: The truth about asset-based lending

Start of disclosure content
XX-011 Equal Housing Lender
XX-014 Loan programs: credit + home
WI-031 Bank + USBI disclaimer