CLO Research

Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset prices as of March 1, 2024.

Seasoned EU CLO managers achieved, on average, positive alpha in 20 out of the 49 months covered by CLO Research's...

These examples underscore the value of integrating loan market information to gain deeper insights into CLO AAA tranche pricing.

AAA tranches may not be as intriguing as mezzanine and equity tranches in terms of their risk profile, yet they...

Outperforming the loan index over a sustained period of time is no easy feat.

It is interesting to note that the median US CLO equity NAV metrics by vintage have remained largely unchanged from one month ago, set against the backdrop of a very flat loan market, as illustrated in the graph below. In addition, it is observed that the median equity NAV from the 2018 vintage appears to be relatively low.

In essence, this deal functioned as a classic principal-driven CLO, aiming to generate returns primarily through asset price appreciation rather than ongoing income. This strategy effectively capitalized on market volatility, leading the deal to perform as expected as the loan market rallied.

Notably, short-dated 'principal-driven' CLO deals that were called within 1.5 years have performed very well, with their average IRR standing at around 34.6%.

On a positive note, the manager has made steady improvement over the past few months and as of the last reading...

So, the question remains: why are US BSL CLO AAA prints still stagnant at 150 bp for managers with top-tier AAA prints?

The table below illustrates the equity distributions for EU CLOs, based on a sample of 145 deals. All these deals have exited their reinvestment period by 31 January 2024. Unlike their US counterparts, the median distribution for EU CLOs has been trending higher. In the EU CLO market, many managers have been more successful at maintaining investments in the first and second years post-reinvestment.

The latest median equity distribution was 2.8%, representing a decrease of 60 basis points from the previous median quarterly distribution—a significant decline. This suggests that an increasing number of deals may become ripe for a call over the next few quarters. However, the decision to actually call them will depend on several other factors.

In terms of EUR notional exposure, fixed-rate exposure has increased by EUR 1.6 billion, due to the issuance of more CLOs since the beginning of 2023. If 2023 vintage deals were excluded, fixed-rate exposure would have decreased by EUR 0.3 billion. The following table presents the breakdown of the total EUR 19.4 billion exposure by manager.

Please refer to the table below for the latest data on underlying fixed-rate exposures in EU CLOs, categorised by vintage year and presented in percentiles (75th, 50th, and 25th). These percentiles illustrate the distribution of fixed-rate exposures across the CLO portfolios, while the 'Deal Count' denotes the number of deals for each vintage. In fact, the latest fixed-rate exposures across EU CLOs have largely remained the same compared to those at the end of 2022. The latest median exposure was 8.6%, compared to 8.5% at the end of 2022. In terms of EUR notional exposure, fixed-rate exposure has increased by EUR 1.6 billion, due to the issuance of more CLOs since the beginning of 2023.

Recently, Golub Capital CLO 71 (M) was priced at 195/260/325/510 for its AAA/AA/A/BBB tranches, respectively. Given the size of the deal, achieving these pricing levels was impressive.