CLNs come of age
Credit-linked notes (CLNs) are tailor-made securities that allow investors to take credit risk in a bespoke form. CLNs have grown to be a significant asset class in their own right. Tony Main takes a closer look at the reasons for this growth and examines in detail the composition and applications for the CLN product.
There are two types of CLN issuance – either a direct issuance by a bank, or an indirect issuance via a special purpose vehicle (SPV). In both cases, a debt instrument is issued for which the payment of coupon and repayment of principal is linked to the performance or otherwise of an identified reference credit. This article focuses on the SPV CLN as it is more adaptable because the funding element of the product is not directly linked to the funding requirements of the bank issuing
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