There is a significant divergence in exposure to loans priced below 80 among EU CLO managers, ranging from 1.4% to 24.1%. In contrast, the variation among US CLO managers is considerably narrower, ranging from 2.1% to 13.1%.
US CLO exposure to Hertz Corp totalled $600.0m across 320 CLOs managed by 31 US CLO managers, with an average exposure of 0.60% per deal.
Across the 2021-vintage European CLOs in the sample, an average of 14.71% of the original collateral balance fell into price bands below 80. Against this backdrop, single-B tranches from this vintage face significant idiosyncratic credit risks. Around 37% of the single-B tranches in the sample had MVOC below 100%, contributing to market concerns about potential impairment across parts of this segment of the EU CLO market. At the lower end, Bridgepoint CLOs 2 and 3 had just 6.47% and 6.17% below 80, respectively. The five RRE deals had sub-80 shares ranging from 7.34% to 8.50%, with each holding less than 0.2% below 60. Capital Four CLO III also had relatively limited exposure, with 7.68% below 80 and 1.61% below 60.
Recent vintages underperformed as distributions received over their shorter lives were insufficient to offset the capital losses implied by BWIC levels, weighing on overall returns.
Across the 2021-vintage European CLOs in the sample, an average of 14.71% of the original collateral balance fell into price bands below 80. Against this backdrop, single-B tranches from this vintage face significant idiosyncratic credit risks. Around 37% of the single-B tranches in the sample had MVOC below 100%, contributing to market concerns about potential impairment across parts of this segment of the EU CLO market. At the lower end, Bridgepoint CLOs 2 and 3 had just 6.47% and 6.17% below 80, respectively. The five RRE deals had sub-80 shares ranging from 7.34% to 8.50%, with each holding less than 0.2% below 60. Capital Four CLO III also had relatively limited exposure, with 7.68% below 80 and 1.61% below 60.
The broader EU CLO single-B market continues to exhibit significant mark-to-market (MTM) pressure, with a substantial proportion of tranches showing limited or negative MV collateral coverage cushions.
