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An online auction process that cuts costs for the biggest buyers of leveraged loans has another benefit: It allows them to delay switching to a new rate benchmark when they refinance debt.

The auction allows loan buyers known as collateralized loan obligations (CLOs) to cheaply refinance the securities they use to fund their purchases. The handful of CLOs that are eligible to use this auction process can continue to tie their borrowing to the London interbank offered rate (LIBOR) instead of embracing new benchmarks that the rest of the market had to start using this year for new transactions and refinancings.


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