collateralized loan obligation

Collateralized Loan Obligation

A type of asset-backed security (ABS) issued using loans that banks have made to corporations as collateral. Because the Korea Credit Guarantee Fund provides guarantees, the lending risk borne by banks is reduced.

In other words, the main creditor bank bundles loans extended to low-credit companies into a loan pool, sells it to a special purpose company (SPC), and that company issues securities. This is mainly used as a way to ease funding difficulties for companies with low credit ratings.

---

Topics: Asset-Backed Securities
Up: Asset-Backed Securities
Category: Wiki/Economy