// definition
CLO
Collateralized loan obligation
Short definition
A securitisation backed by a portfolio of corporate loans. It finances those loans by issuing securities with different levels of seniority. A contractual waterfall allocates cash flows, paying senior tranches before subordinated tranches, while losses first reach the residual tranche. The protection afforded to a security depends on its seniority, the portfolio and the contractual terms as well as its rating.
risk atlas
Knowledge map
Intuition
Seniority determines payment priority and the order in which a loan portfolio’s losses reach investors.
Related analyses
Related guides
Primary sources
- NAIC, Collateralized Loan Obligations Primer, 2018Pages 2–4: loan portfolios, tranches, payment priority and the first-loss position.
- NAIC, adopted CLO factors for year-end 2026LR002 pre-tax C-1 factors and the surcharge for the specified thin BSL CLO tranches.