"It's not a pretty picture," said Gerdes. "We're sitting on probably, by all estimates, at least $160 billion of leveraged loans that are kind of yesterday's deals ... that have structural issues that just won't allow them to clear market."
"Spreads have widened at least 200 basis points over the last six to seven months, and leverage comes down at least a turn and a half," Gerdes continued. "Dividend recap loans, covenant-lites, PIK toggle features, equity cures [are gone, but] a lot of the loans in the overhang are stuck with those features."
Watch the video for his full estimate of the the CLO market. - George White
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