Botched fallbacks leave CLOs facing early Libor switch

Nearly two-thirds of CRE securitisations issued since 2019 have already triggered fallback clauses

CMBS

Dozens of commercial real estate (CRE) securitisations will transition away from US dollar Libor in the coming weeks, more than two years ahead of schedule, after botched legal language was inserted into the deals. At current rates, the early changeover will hit equity investors, who take the first loss in securitised products.

The problem is thought to affect nearly two-thirds of CRE collateralised loan obligations (CLOs) issued since 2019. A total of 54 CRE CLOs worth a combined $37 billion

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