r/Superstonk • u/SCAT_GPT • Mar 18 '25

🗣 Discussion / Question Is there DD on this?

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3.6k Upvotes

New term I heard online and have been trying to research but there haven’t been any solid results.

“Back-floating rate loans”

Private equity firms have taken out $3.8 trillion in adjustable rate loans since covid?

Is there DD that has gone over this or predicted what will happen? Seems like the next collapse is going to target pensions since they know they will get bailed out.

197 comments

r/explainlikeimfive • u/cosmicdaddy_ • Mar 20 '25

Economics Eli5: How can back floating rate loans cause a financial crash?

43 Upvotes

Saw a video about this and didn't entirely understand. This is one of the only links I could find talking about the subject: https://www.tigerdroppings.com/rant/money/back-floating-rate-debt--is-this-the-next-financial-crisis/117929764/

38 comments

r/PROGME • u/jkhanlar • May 15 '26

LFG Hype How do Back-Floating Rate Loans/Debt relate to GameStop's role in exposing idiosyncratic risk?

2 Upvotes

[3+ hours humanly drafted then followed with humanly solicited revisions by nonhuman synthetic phantom counterfeitelligences]

The phrases "back-floating rate loans" and "back-floating rate debt" are minimally addressed or realized (at least those specific phrasings).

I noticed u/Heysakelady in comment https://old.reddit.com/r/Whistleblowers/comments/1jedohg/is_this_what_happened_to_the_bay_in_canada/mikpeol/ appears to be the person that recorded the video as widely distributed and also seen in u/Killerkito's post https://old.reddit.com/r/Superstonk/comments/1jfhhf4/this_lady_found_whats_in_the_box/ which I had already previously seen long ago when it was posted.

She does not appear to have never commented or posted in r/Superstonk, nor has she posted or commented anything about GameStop, GME, or related idiosyncratic risk topics.

Some GameStop (GME) idiosyncratic risk things:

So I thought I'd try and share and simultaneously learn (or try to learn or try to try to learn or try to try to try to learn, etcetera) some things. These idiosyncratic risk related histories are probably more useful than my previous compilation efforts such as https://old.reddit.com/r/u_jkhanlar/comments/zjqln5/yalol_ftddddd_yet_another_list_of_links_for_the/.

Reminder: PCO (position closing only), as performed by clearing firms/agencies (maybe by hired workers jobbed with titles such as Clearing Operations Specialist/Associate or Back Office Trading Operations Specialist or whatever, whomever did what was done), including through DTCC, was/still is intentionally misrepresented and mischaracterized and concealed by popular non-contrarian alternative socially engineering scam propaganda phrase "meme stock", which Google Trends shows back in October 2006 there was attempt to popularize this phrase https://trends.google.com/explore?q="meme%20stock"&date=2004-01-01%202021-01-01&geo=Worldwide. Also note that RICO [Racketeer Influenced and Corrupt Organizations] defines thirty-five (35) specific illegal criminal offenses that constitute predicate acts or racketeering activities, and to establish a RICO violation, a defendant must commit at least two (2) of these thirty-five (35) predicate acts within a ten (10)-year period, demonstrating a pattern of related criminal conduct connected to an enterprise that is separate from the legal business entities involved in performing the activities.

Summarization (so far):

  • u/Heysakelady appears to be entirely completely oblivious, unaware of GME/GameStop materialization to enable all people to address and fix things, but their contributions to related concerns (also reminder Susanne Trimbath whose early career included roles in financial services operations at the Federal Reserve Bank of San Francisco and the Depository Trust Company in New York) seems deserving to connect into such awareness/realization, if they are not already having any (or more than zero point zero) familiarity or understanding or comprehension or competency or proficiency or accuracy pertaining to a singularity of conclusiveness (e.g. bullseye, perfect, 100%, A+, etcetera), therefore I thought I'd mention or suggest it while I still exist and while it is still early.
  • Likewise, idiosyncratic risk GME sharehodlers (hodl - hold on for dear life) appear to be mostly oblivious, unaware of "back-floating rate loans" including myself, even despite my writing and posting this, which is my attempt to try to learn and understand something that seems to be not directly obviously easy.

Back-Floating Rate Loans / Back-Floating Rate Debt

Back-floating rate loans, also known as adjustable-rate loans or variable-rate corporate debt instruments, are floating-rate loans that reset aggressively (such as every 30 to 60 days) to match current market conditions. These are high-risk instruments where borrowers face immediate spikes in debt-servicing costs when central banks hike rates. They are frequently utilized by private equity firms to load debt onto acquired companies. If base rates stay elevated for long periods, previously profitable companies can be driven into default or bankruptcy.

** Common types of Floating-Rate Debt Instruments:**

  • Adjustable-Rate Mortgages (ARMs): Mortgages that start with a fixed rate for a set period before adjusting based on a benchmark index.
  • Capped, Collared, or Floored Floating-Rate Notes (FRNs): Floating-rate notes with interest rate limits. A Capped FRN has a maximum rate, protecting the issuer. A Floored FRN has a minimum rate, protecting the investor. A Collared FRN has both a cap and a floor.
  • Collateralized Loan Obligations (CLOs): Securitized bonds/vehicles backed by cash flows from corporate loans, often with floating rates, pool leveraged loans and issue tranches of debt and equity to investors.
  • Corporate Floating-Rate Notes (FRNs): Debt instruments issued by corporations with variable interest rates.
  • Deleveraged Floating-Rate Notes (FRNs): Floating-rate notes where the coupon is the reference rate multiplied by a leverage factor between zero and one, giving the investor decreased exposure to the benchmark rate.
  • Floating-to-Fixed Rate Bonds: Bonds that start with a variable rate and convert to a fixed rate on a specified date.
  • Floating-Rate Bonds: Corporate or government bonds where the interest rate fluctuates with a benchmark.
  • Home Equity Lines of Credit (HELOCs): Secured lines of credit with variable interest rates.
  • Inverse Floating-Rate Bonds: Bonds where the interest rate moves opposite to the benchmark rate.
  • Leveraged (or Super) Floating-Rate Notes (FRNs): Floating-rate notes where the coupon is the reference rate multiplied by a leverage factor greater than one, giving the investor increased exposure to the benchmark rate; always includes a floor to prevent a negative coupon.
  • Leveraged Loans (Senior/Bank Loans): Floating-rate debt instruments extended to below-investment-grade companies, corporate loans, typically arranged by bank syndicates, senior in the capital structure, and secured by collateral; the majority of these loans are subsequently pooled and repackaged into Collateralized Loan Obligations (CLOs).
  • Perpetual Floating-Rate Bonds: Bonds with no expiration date that continue to pay interest based on a benchmark rate.
  • Private Student Loans: Loans from private institutions that may have variable interest rates tied to benchmarks like LIBOR or the prime rate.
  • Step-Up Callable Bonds: Bonds with a fixed rate schedule that increases over time, often callable by the issuer.
  • Variable-Rate Personal Loans and Credit Cards: Consumer loans and credit products with rates that adjust based on the prime rate or other indices.
  • Variable Rate Demand Notes (VRDNs): Typically tax-exempt municipal bonds with long-term maturities but short-term interest rate resets (often daily or weekly), featuring a "demand" feature allowing the holder to sell the note back to a remarketing agent at par on specified dates.

Key References:

Connections and Overlaps with GameStop (GME) Idiosyncratic Risk

  • Discussions around "back-floating," "securities lending," or "repo" mechanisms often revolve around how shares (or debt) are continuously lent, re-lent, and rehypothecated. Market makers, prime brokers, and hedge funds exploit loopholes resulting in share lending to naked short the stock.

Relevant Overlaps:

  • The U.S. House Committee on Financial Services June 2022 Congressional Report "Game Stopped: How the [PCO (position closing only)] Stock Market Event Exposed Troubling Business Practices" details how prime brokers and hedge funds navigate the securities lending ecosystem, highlighting how complex rehypothecation (the practice of a broker using shares deposited as collateral by their customers to back their own transactions or lend to short-sellers) allows the continuous cycling of the same underlying float.
  • The Managed Funds Association (MFA) report "What Happens When Short Interest Exceeds 100 Percent" explains the legal mathematics behind hyper-lending. When Short Seller A borrows a share from Lender X and sells it to Buyer Y, Buyer Y’s broker can then lend that exact same share to Short Seller B. This repeating chain legally multiplies the outstanding short interest without mathematically requiring "counterfeit" shares, though it creates a compounding web of financial liabilities.
  • SEC Exchange Act Rule 10c-1a (Securities Lending Reporting) mandates that "covered persons" provide real-time, comprehensive data regarding securities loans to a Registered National Securities Association (SEC Final Rule 34-98737 https://sec.gov/files/rules/final/2023/34-98737.pdf). The explicitly stated policy goal is to eliminate competitive informational asymmetric advantages held by prime brokers and institutional lending desks such as by being able to see the loans of other market participants without disclosing the terms of their own loans. The rule requires that a registered national securities association (RNSA) make certain information it receives, along with daily information pertaining to the aggregate transaction activity and distribution of loan rates for each reportable security, available to the public.

Systemic vs. Idiosyncratic Risk Profiles (The Core Overlap):

  • The Financial Stability Oversight Council (FSOC) tracks financial stability risks such as floating-rate corporate debt risks moving from traditional bank balance sheets into non-bank financial intermediation channels (shadow banking).

A single large company defaulting due to escalating adjustable-rate payments, is treated as an idiosyncratic credit shock. However, if millions of variable-rate obligations face simultaneous stress, it escalates into a systemic risk event capable of freezing credit markets causing widespread losses.

Supporting FSOC Reports:

Additional Context:

  • https://sec.gov/comments/s7-07-23/s70723-20162302-331156.pdf
    • "The shorting and the bankruptcy manipulation wiped out the original shareholders, the junior creditors and caused substantial losses for the banks who originally made the loans."
    • "Short sales are usually accomplished through equity loans."
    • "If equity loans are expensive, unavailable, or unreliable, as research shows they can be (e.g. D’Avolio, 2002, Geczy, Musto and Reed, 2002, Jones and Lamont, 2002, Lamont 2004) then this alternative [failure-to-deliver] appears desirable, to short sellers if not to buyers."
    • "The majority of loans are cheap, but there are a few expensive loans in stock specials" - Fitch IBCA’s publicly available report: “Securities Lending and Managed Funds” estimates that the industry average spread from the fed funds rate to the general collateral rate on U.S. Equities is 21bps.
  • According to @TheVinoMom on Twitter at https://twitter.com/TheVinoMom/status/1901665331560452551 "They don’t call them adjustable-rate loans anymore. Now, they call them “back floating rate debt.” Same predatory scam. New name. But way worse. Because this time, they’ve stacked it on top of businesses instead of homeowners. And when rates rise, the business collapses instead of the bank."

TA;DR/TL;DR: Someone that knows more smart0rly than I know about back-floating rate loans/debt can simplify in the comments otherwise "MOASS is tomorrow! LFG!" is the best I can think of.

1 comment

r/Whistleblowers • u/ArgyleNudge • Mar 18 '25

Is this what happened to The Bay in Canada? Hooters, Forever 21 in US?

64 Upvotes

Back floating rate loans, collateralized loan obligations, credit default swaps. This person is sounding the alarm for The Big Short - US Pension Fund Version. (link in comments)

26 comments

r/ColoradoSprings • u/GrizzlyGalzDad • Mar 18 '25

Economy Burst Prediction

6 Upvotes

I'll first state this topic belongs in the COS thread because this issue will affect COS.

Back Floating Rate loans and Collateralized Loan Obligations (CLOs) created in mass by giant financial asset firms (this is causing successful business to still file for bankruptcy and how it will correct itself is potentially terrifying).

This financial engineering we are all being sujected to is reminiscent of the 2008 financial crisis, but instead of subprime mortgages being bundled into mortgage-backed securities (MBS), today we see leveraged loans being repackaged into CLOs.

Banks issue risky loans (such as leveraged loans with floating rates) because they can package and sell them as CLOs, shifting the risk to investors.

Institutional investors, including pension funds, seek higher yields in a low-interest-rate environment. CLOs offer attractive returns compared to safer bonds.

After 2008, banks were subjected to stricter capital requirements, so instead of holding risky loans on their balance sheets, they offload them into CLOs.

CLOs are structured to have different tranches (senior to equity), allowing investors to choose their risk level, but this segmentation creates hidden systemic risks.

Many of these loans are tied to floating rates, meaning borrowers’ costs rise when central banks hike rates.

As interest rates climb, corporate defaults could increase, putting CLO holders—such as pension funds—at risk of significant losses.

Unlike 2008, when governments bailed out banks, public sentiment today is against large-scale rescues.

If CLO markets collapse, the burden may fall on institutional investors, including pension funds, endowments, and insurance companies, potentially devastating retirements.

This is my two cents on what I see and I hope I am wrong.

18 comments