It’s not that I’m so smart, it’s just that I stay with problems longer. – Albert Einstein
(16 March 2022) Month-to-Date Change in US CLO Equity NAV
CLO Equity NAV does not mean a third-party valuation of a CLO equity tranche. Rather it means the liquidation value of the equity tranche. Basically, CLO Equity NAV is calculated by dividing the residual collateral value (MV collateral net of total CLO debt notional) by the equity tranche notional.
It is a useful metric as it is easily understood. This metric also magnifies and highlights any change in equity NAV even when the underlying collateral market value moves slightly. For CLO deals that have come out of their non-call period, CLO equity NAV allows investors to calculate the final IRRs in a redemption scenario. As one can imagine, the final IRR metric is sensitive to the CLO equity NAV, especially for deals that have a shorter operating history. Typically, a CLO equity tranche would trade higher than its equity NAV unless it is due for a call.
The latest average CLO Equity NAV (based on a sample of 486 deals) stood at around 40.6% as of 15th March 2022. The MTD change in CLO equity NAV was -21 points while the average bid price of the S&P/LSTA U.S. B/BB Ratings Loan Index fell from 98.37 to 96.34.
| US CLO EQ NAV (Clean) | |
| Deal Count (vintage 2018–2021) | 486 |
| Average Change (1 March – 15 March) | -21.0% (points) |
| Percentile | |
| 90% | -10.6% |
| 75% | -18.2% |
| 50% | -20.8% |
| 25% | -22.8% |
| 10% | -25.6% |
Source: Intex, LPC, CLO Research
Note that the average bid price of the S&P/LSTA U.S. B/BB Ratings Loan Index as of 1 Jan 2022 was 99.13.
Related articles:
US CLOs: Implied Annual Default and Recovery Rates Incorporating Distressed and Trading Losses
Annual Default Rates and Redeemed EU CLO Equity IRRs
Are CLOs Meant To Be Redeemed Prematurely?
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The information, research, data, research-related opinions, observations, and estimates contained in this document have been compiled or arrived at by CLO Research Group, based upon sources believed to be reliable and accurate, and in good faith, but in each case without further investigation. None of CLO Research Group or its service providers; authorised personnel, or their directors make any expressed or implied presentation or warranty, nor do any of such persons accept any responsibility or liability as to the accuracy, timeliness, completeness, or correctness of such sources and the information, research, data, research related opinions, observations and estimates contained in this document. All information, research, data, research-related opinions, observations, and estimates in this document are in draft form as of the date of this document and remain subject to change and amendment without notice. Neither CLO Research Group nor any of their third-party providers shall be subject to any damages or liability for any errors, omissions, incompleteness, or incorrectness of this document. This article is not and should not be construed as an offer, or a solicitation of an offer, to buy or sell securities and shall not be relied upon as a promise or representation regarding the historical or current position or performance of any of the deals or issues mentioned in it.
