Earlier I had read an article, which Bea Babbage also posted today on site, a Bloomberg article on CLOs.
Companies we follow on this site a bit, Eagle Point Credit (ECC), Oxford Lane Capital (OXLC) and Priority Income Fund (untraded), all are primarily focused on owning collateralized loan obligations (CLOs).
These companies issue term preferred shares to leverage their investments. Being closed end funds, these companies must have a coverage ration of 200% on senior securities (debt and/or preferred stock are senior securities), so this always brings a measure of safety to the preferred issues.
We have owned all of these term preferreds in the past and currently own a small position in the Priority Income Fund term preferreds.
This article from Bloomberg is simply ‘food for thought’–no predictions for disaster from me–nor should anyone sell any holdings they have based on this article–BUT everyone should know that there are risks in owning any higher yielding security.