Hello Monkeys,
I am preparing an interview for a CLO role.
When those leveraged loans are served as the collateral asset.
- An advance rate is the percentage of the value of the collateral that a lender is willing to extend as a loan.
- LTV equals to Value of Loan / Value of Asset
Does that mean LTV and Advance Rate are the same thing?
Thanks in advance
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LTV comes into play more so when looking at individual loan(s) and how much you are paying for the loan(s). Advance rate has to do more with the overall facility. The advance rate, assume 70%, means that 70% of the loans/collateral can be purchased using that line of credit. The remaining 30% is typically provided by subordinated debt or equity.
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