High CCC Exposure May Not Result in Underperformance (Updated)

Typically, deals that rank well in terms of CCC exposure would be expected to perform well. This appears to be true only to a certain extent. The median deal with CCC exposure of 4 to 5 percent did well, achieving 25 basis points of alpha, while the median deal with CCC exposure of 5 to 6 percent registered an alpha of 22 basis points. However, for deals where CCC exposure ranges between 6 and 11 percent — representing approximately 80 percent of the sample — the relationship between alpha and CCC exposure appears to break down. For instance, deals with CCC exposure in the 9 to 10 percent range tend to perform better than those with CCC exposure between 6 and 9 percent.