Corporate loans, securitized (collateralized debt obligations, CDOs)

Special type of asset-backed securities, a non-significant proportion of which are now privately placed in the euro area. These are securities issued by special purpose vehicles, where the special purpose vehicle in turn has bonds issued by corporations or banks [collateralized bond obligation] or bank loans [collateralized loan obligation] in its portfolio (debt securities issued by a special purpose vehicle, often a securitization vehicle, which buys and holds bonds issued by corporations or banks [collateralized bond obligation] or bank loans [collateralized loan obligation]. CDOs provide liquidity for securities that are not automatically liquid. It is used by banks to refinance themselves with investors wanting to take a risk on a debt portfolio. The level of the risk will depend on the nature and quality of the debts held by the vehicle and on the level of the ranking of the different debt instruments issued by the vehicle). – Because the securitized corporate loans are not settled on the stock exchange, it is difficult to measure the securitization volume on this sub-market with statistical precision. – See originate-to-distribute strategy, private placement, tranche, securitization, securitization structure. – Cf. Deutsche Bundesbank Monthly Report of March 2006, p. 40 (overview), ECB Monthly Report of February 2008, p. 102 (problems relating to monetary policy).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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