What types of loan on loan facilities are there?
What type of loan on loan facilities can debt funds use to boost returns? Do they all have mark-to-market features?
Jun 05, 2020Jun 05, 2020
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Comments (9)
Warehouse lines, Repos and CLOs are the main food groups.
Great thanks. And are all of these facilities normally mark-to-market?
Repo/Warehouses you are dealing more with debt covenants and ratios.
Disagree - CRE CLOs are non mark to market financing vehicles.
Sorry - you are correct - I was incorrect. However, you can get margin called if the underlying securities drop enough in value, like in March.
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Learn moreOK - so there aren't really any instruments that are truly non mark-to-market? I guess if there were, there wouldn't be so many struggling debt funds
One thing to consider is that the vast majority of Debt Funds lend on short term instruments which are typically floating rate. Since they lend out money for short periods, their personal credit facilities are also pretty short term in nature which necessitates mark to market (I'm also assuming they are getting a rate discount by having that provision there).
The most common include|: retail credit facility, revolving loan facility, committed facility.
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