The Case for Investing in Floating-Rate Loans

The video discusses floating rate bonds, focusing on their attractive yields and the role of Libor as a base rate. It highlights the impact of M&A activity on loan issuance, using Warren Buffett's acquisition of Heinz as an example. The video also covers CLO formation, market demand, and compares the US and European markets. It concludes with an analysis of default rates and recovery expectations, emphasizing the senior and secured nature of these loans.

What is the base rate used for floating rate loans?

• Discount Rate

• Federal Funds Rate

• Libor

• Prime Rate

Which activity primarily drives the issuance of floating rate loans?

• Corporate Restructuring

• Stock Buybacks

• M&A Activity

• Initial Public Offerings

What is the approximate size of the US market for floating rate loans?

• $150 billion

• $1 trillion

• $500 billion

• $880 billion

During the financial crisis, what was the peak default rate for floating rate loans?

• 11%

• 8%

• 5%

• 15%

What is the typical recovery rate on defaults for senior and secured loans?

• 90-100 cents on the dollar

• 70-80 cents on the dollar

• 50-60 cents on the dollar

• 30-40 cents on the dollar