CLO Research

The table below shows, for each manager, the total number of deals in the sample that have exited their non-call periods, along with the number of CLO resets conducted since mid-2023. Resets can offer meaningful benefits to both debt and equity investors. For debt holders, a reset functions much like a large prepayment event, with all tranches repaid at par — a favourable outcome, particularly for out-of-the-money senior tranches issued at tight spreads. Lower mezzanine investors also tend to prefer deals with a higher likelihood of reset, as it provides downside protection akin to an insurance policy. In underperforming deals, these tranches may trade at a discount due to low MVOCs, even in strong loan markets. A reset restores them to par, helping to mitigate risk.

US BSL CLO AAA tranches are currently pricing cheaply relative to their year-to-date averages.

Relative to their year-to-date averages, EU CLO AAA, AA, BB, and single-B tranches are currently screening as cheap.

The AAA tranche was last refinanced in early 2021 at a very tight level of 3M EURIBOR + 64 bps. As of the May trustee report, its factor stood at 57%. During the post-reinvestment period, annual prepayment rates were 3.8% in the first year and 26.4% in the second. Investcorp has already called many seasoned deals in the third year post-RP, and this would add to that list.

As shown in the first table below, DMs ranged from 102 to 122 and WALs from 0.82 to 2.43 years for selected tighter-print US BSL CLO AAA bonds that traded above par.

Both primary US BSL and EU CLO AAA tranches are currently pricing wide relative to year-to-date averages, which negatively affects new issue equity arbitrage. That said, the market is likely to self-correct over time, and as long as loan market conditions remain strong, there is no reason AAA spreads should not tighten further.

Benchmarking EU CLO Pricing Across the Capital Stack

Benchmarking US BSL CLO Pricing Across the Capital Stack

A sample of 559 EU CLO deals (vintage 2013–2024) is included in this study. Deals with a collateral pool factor below 60% are excluded.

A sample of 1,718 US BSL CLO deals (vintage 2013–2024) is included in this study. Deals with a collateral pool factor below 55% are excluded.

The loan market rally has driven broad spread tightening across the CLO stack. Mezzanine tranches responded the most, reflecting their higher leverage and credit sensitivity. In contrast, senior tranches from top-tier CLOs showed a beta below 1.0, indicating a more muted reaction to loan spread moves.

The reset, priced on 20 June 2025, raised the WACC from 185 bps to 205 bps but extended the reinvestment period by 4.5 years and increased leverage through an additional €28 million in liabilities, including a small Class X tranche.

This study examines a sample of 83 EU CLO equity tranches that have traded via BWIC since July 2024. Based on their disclosed cover prices (as provided by SCI), IRRs are calculated...

Among 123 EU CLO deals that have been or are likely to be fully redeemed, equity tranches from the 2020, 2022, and 2023 vintages stood out with strong final IRRs and average equity NAVs above 100%, as shown in the table above. 11 of the deals were static, with an average IRR of 30.9%. Seven of these were managed by Palmer Square. Static deals can do well in volatile markets by capturing the pull to par of the loan portfolio. If the market stays weak, slower prepayments help preserve leverage—supporting stronger annual distributions. On average, EU CLO managers have met equity investor expectations, with redeemed or soon-to-be-redeemed deals delivering an average equity IRR of 12.3%. This reflects a mix of disciplined issuance, timely resets (notably for 2014–2016 vintages), resilient loan performance, manager expertise, and low liability costs.

This article includes several tables showing the average annualised prepayment rates for each seasoned manager in the first, second, third, and fourth years of the post-reinvestment period (post-RP), as well as post-RP prepayment rates for individual deals. The sample includes deals that had exited their reinvestment periods by 31 December 2024.