Financial Glossary¶

This glossary provides definitions for CLO, structured finance, and financial terminology commonly used in CalcBridge.

A¶

Accrued Interest¶

Interest that has accumulated on a debt instrument since the last interest payment date but has not yet been paid.

Adjusted Portfolio Balance¶

The total portfolio balance after applying haircuts or adjustments for defaulted, discounted, or non-performing assets.

Agency Rating¶

A credit rating assigned by a rating agency (Moody's, S&P, Fitch) to assess creditworthiness of a debt issuer or instrument.

Amortization¶

The gradual repayment of principal over time through scheduled payments, reducing the outstanding loan balance.

Asset Coverage Test¶

A compliance test measuring whether the value of collateral assets sufficiently covers outstanding liabilities.

B¶

Base Rate¶

The reference interest rate (SOFR, LIBOR, EURIBOR) used to calculate floating-rate loan interest payments.

Breach¶

A condition where a compliance test fails, typically requiring remediation actions such as redirecting cash flows.

BSL (Broadly Syndicated Loan)¶

A loan originated by banks and distributed to institutional investors through syndication, typically larger than $100M.

C¶

Call Protection¶

A provision preventing the borrower from prepaying a loan for a specified period, protecting investor yield.

Cash Flow Waterfall¶

The priority-ordered sequence determining how cash from the CLO collateral is distributed to various tranches and stakeholders.

CCC Bucket¶

The maximum percentage of portfolio assets rated CCC+ or below that a CLO can hold without triggering compliance issues.

CLO (Collateralized Loan Obligation)¶

A structured finance product that pools leveraged loans and issues multiple tranches of securities with different risk/return profiles.

Collateral¶

The pool of assets (typically leveraged loans) backing a CLO or other structured finance vehicle.

Collateral Manager¶

The investment manager responsible for selecting, trading, and managing the loan portfolio within a CLO.

Concentration Limit¶

Maximum exposure allowed to a single obligor, industry, or other category to ensure portfolio diversification.

Coupon¶

The interest rate paid on a debt instrument, expressed as an annual percentage of par value.

Coverage Test¶

Compliance tests (OC and IC) that measure the adequacy of collateral value and interest income relative to liabilities.

Credit Enhancement¶

Structural features that provide additional protection to senior tranches, including subordination, excess spread, and reserve accounts.

Cushion¶

The margin or buffer between a current metric value and its compliance threshold. Larger cushions indicate safer positions.

CUSIP¶

Committee on Uniform Securities Identification Procedures - a 9-character alphanumeric code uniquely identifying North American securities.

D¶

Default¶

Failure of a borrower to meet contractual obligations, typically non-payment of interest or principal.

Defaulted Security¶

A loan or bond where the obligor has failed to meet payment obligations, typically traded at distressed prices.

Discount Obligation¶

A debt instrument trading below par value, often due to credit deterioration or market conditions.

Diversity Score¶

A measure of portfolio diversification, often calculated using Moody's methodology based on industry and obligor concentration.

DQ (Delinquent)¶

A loan where payments are past due but not yet in default, typically categorized by days delinquent (30/60/90 days).

E¶

Effective Date¶

The date when a CLO becomes fully invested and compliance tests begin to apply.

Eligible Investment¶

An asset that meets all criteria specified in the indenture to be included in the CLO collateral pool.

Equity Tranche¶

The most junior tranche in a CLO capital structure, absorbing first losses but receiving residual cash flows after all debt tranches are paid.

Excess Spread¶

The difference between interest received from collateral and interest paid to debt tranches, available for equity or reserve accounts.

F¶

First Lien¶

A loan with the highest priority claim on borrower assets in the event of default or bankruptcy.

Floating Rate¶

An interest rate that adjusts periodically based on changes in a reference rate (SOFR, EURIBOR).

Floor¶

A minimum interest rate applied to floating-rate loans, providing a base return regardless of reference rate movements.

H¶

Haircut¶

A reduction applied to the value of an asset for compliance test calculations, typically for discounted or non-performing assets.

Hedge¶

A financial instrument used to offset potential losses, such as interest rate swaps to manage rate exposure.

I¶

IC Test (Interest Coverage Test)¶

A compliance test comparing interest income from collateral to interest expense on debt tranches plus fees.

Indenture¶

The legal document governing a CLO, specifying all terms, covenants, tests, and waterfall mechanics.

Interest Diversion¶

Redirection of excess interest from equity to pay down senior debt when certain triggers are breached.

ISIN¶

International Securities Identification Number - a 12-character alphanumeric code identifying securities globally.

L¶

Leverage¶

The ratio of debt to equity or assets, indicating the degree of financial risk amplification.

LIBOR (London Interbank Offered Rate)¶

A formerly used benchmark interest rate, now largely replaced by SOFR and other risk-free rates.

Loan-to-Value (LTV)¶

The ratio of a loan amount to the value of the underlying collateral, used to assess lending risk.

M¶

Manager¶

See Collateral Manager.

Mark-to-Market¶

Valuing assets at current market prices rather than original purchase price or par value.

Maturity Date¶

The date when a loan or bond must be repaid in full.

Moody's Rating¶

Credit ratings assigned by Moody's Investors Service, ranging from Aaa (highest) to C (lowest/default).

MVOC (Market Value Overcollateralization)¶

An OC test using market values rather than par values, providing a market-based view of collateral adequacy.

N¶

NAV (Net Asset Value)¶

The total value of assets minus liabilities, often used to value equity tranches.

Non-Accrual¶

A loan status where interest is no longer being accrued due to concerns about collectability.

Non-Call Period¶

The initial period after CLO closing during which the deal cannot be called or refinanced.

Notional Amount¶

The face value or principal amount of a loan or derivative used for calculation purposes.

O¶

Obligor¶

The entity responsible for repaying a loan, also known as the borrower.

OC Test (Overcollateralization Test)¶

A compliance test comparing the principal value of collateral to the principal of debt tranches.

OID (Original Issue Discount)¶

A debt instrument issued at a price below par value, with the discount amortized as additional interest over the life of the instrument.

P¶

Par¶

The face value or principal amount of a loan or bond, typically $100 or $1,000 per unit.

Par Build¶

The increase in portfolio par value through reinvestment of principal proceeds at prices below par.

Payment Date¶

The scheduled date when interest and/or principal payments are made to CLO investors.

PIK (Payment in Kind)¶

Interest paid by increasing the principal balance rather than cash payment, deferring actual cash flow.

Portfolio¶

The collection of loans or assets held within a CLO or investment vehicle.

Prepayment¶

Early repayment of principal before the scheduled maturity date.

Principal¶

The original amount of a loan that must be repaid, excluding interest.

Priority of Payments¶

See Cash Flow Waterfall.

R¶

Ramp-Up Period¶

The initial period after CLO closing when the manager acquires collateral to reach full investment.

Rating Agency¶

Independent organizations (Moody's, S&P, Fitch) that assess and assign credit ratings.

Recovery Rate¶

The percentage of principal recovered when a defaulted loan is liquidated or restructured.

Refinancing¶

Replacing existing debt with new debt, typically at better terms (lower spread, longer maturity).

Reinvestment Period¶

The period during which principal proceeds can be reinvested in new collateral rather than used to pay down debt.

Reset¶

Extending the reinvestment period and/or maturity of a CLO, often with updated terms.

S¶

S&P Rating¶

Credit ratings assigned by S&P Global Ratings, ranging from AAA (highest) to D (default).

Second Lien¶

A loan with subordinated claim to first lien debt in the event of default or bankruptcy.

Senior Tranche¶

Debt tranches with highest payment priority and typically AAA/Aaa ratings.

SOFR (Secured Overnight Financing Rate)¶

The primary USD benchmark interest rate, replacing LIBOR for new transactions.

Spread¶

The additional interest rate above the base rate that a borrower pays, reflecting credit risk.

Subordination¶

The structural protection where junior tranches absorb losses before senior tranches.

T¶

Threshold¶

The limit or boundary value for a compliance test, breach of which triggers remediation actions.

Trading Gains/Losses¶

Realized profit or loss from selling collateral assets at prices different from their purchase price.

Tranche¶

A slice or layer of a CLO capital structure with specific risk, return, and payment priority characteristics.

Trustee¶

The independent party responsible for administering CLO payments, maintaining records, and ensuring compliance.

W¶

WAL (Weighted Average Life)¶

The average time until principal is expected to be repaid, weighted by principal amounts. Key metric for CLO duration.

Formula: WAL = Sum(Time to Payment x Principal Payment) / Total Principal

WARF (Weighted Average Rating Factor)¶

A numeric score representing the weighted average credit quality of the portfolio, where higher values indicate lower quality.

Common WARF Values:

WAS (Weighted Average Spread)¶

The average spread above the base rate earned on portfolio assets, weighted by principal. Key metric for yield.

Formula: WAS = Sum(Spread x Principal) / Total Principal

Waterfall¶

See Cash Flow Waterfall.

CalcBridge-Specific Terms¶

Calculation Job¶

A background task that processes all formulas in a workbook and stores results.

Compliance Test Suite¶

A predefined set of compliance tests configured for a specific CLO or portfolio type.

Mapping Profile¶

A configuration that maps source data column names to CalcBridge standard column names.

Scenario¶

A what-if simulation that applies proposed trades to a portfolio to analyze compliance impact.

Tenant¶

An isolated organization instance in CalcBridge with its own users, data, and configurations.

Workbook¶

An uploaded Excel file containing portfolio data and formulas, stored and processed by CalcBridge.

Quick Reference Tables¶

Rating Agency Comparison¶

Common Compliance Tests¶