Time is an herb that cures all diseases. – Benjamin Franklin
21 Dec: ID/OC Breach Table
As of CLO trustee reports updated by Intex as of 21 Dec, 1,490 US CLOs and 352 EU CLOs are included for the count update.
- 207 US CLO deals failed their Interest Diversion (ID) or/and OC Tests (vs 219 as of 26 Nov)
- 9 EU CLO deals failed their ID or/and OC tests (vs 7 as of 26 Nov)
- 72 Global CLO Managers manage these global 216 deals (vs 67 as of 26 Nov):
- 3 managers have at least 10 deals that breached ID/OC tests
- 10 managers have 5 to 9 deals that breached ID/OC tests
- 59 managers have 1 to 4 deals that breached ID/OC tests
- 311 US CLOs have a test cushion of less than one point
- 37 EU CLOs have a test cushion of less than one point
Interest diversion (ID) test only applies during the reinvestment period. If a deal breached this test, up to 50% of interest cashflows after paying the lowest-rated debt tranche would be diverted to invest in more collateral. The remaining excess interest proceeds would be used to pay the subordinated management fees before paying the equity notes.
Failure of the lowest-rated tranche (B/BB) OC tests would lead to the diversion of excess interest cash flow after paying the lowest-rated tranche coupons meant to pay subordinated management fees and the equity notes, for the paydown of AAA tranche.
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 of the information, research, data, research related opinions, observations and estimates contained in this document. All information, research, data, research related opinions, observations and estimates contained in this document are in draft form as at 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.