CLO Research

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.

Of these 207 US CLO deals, about 63 are better positioned for redemption as they have an equity NAV exceeding 10 percentage points, based on asset prices as of February 5, 2024. Most of these deals originate from the 2017 and 2018 vintages, as indicated in the table below. Market conditions are also conducive for a call. However, the final decision rests with the equity holders.

Gain invaluable insights from this updated article, which explores the equity internal rates of return (IRRs) of over 500 US CLO deals. It highlights managers who have adeptly handled these deals, demonstrating equity IRRs exceeding the 12.0% threshold.

Please see the chart below for the distribution of the latest EU CLO equity payments across 481 EU CLO deals. The median deal's latest distribution was at 4.2%. At least 10 seasoned deals from the 2013–2017 vintage are well-positioned for redemption. These deals have exited their reinvestment period and have achieved at least 110% of total equity distributions plus NAV on their last reporting dates.

Please see the table below for a list of EU CLO deals that distributed over 10 percentage points to their equity holders on their latest payment dates.

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Another noteworthy aspect of the deal is that, while its reinvestment period ended in early 2020, it managed to maintain a very low prepayment rate of around 3-4% p.a. during the first two years of the post-reinvestment (post-RI) period.

Madison Park Funding XLI (formerly Atrium XII) deal was recently called. This deal, managed by CSAM, was closed in late 2015. The deal’s average equity distribution was very impressive, at 19.1% over a period of around 8 years. This deal did a reset in late 2017, reduced its cost of funding significantly, and distributed excess par upon reset. The deal's solid first distribution of 17.2% certainly helped boost the average annual distribution too. Without the par distributions, the deal's annual distribution would likely be around the 17% mark rather than in the 19% area.

The table below shows the top-performing managers with the most 2013–2019 deals that are in the 90th percentile category. Notably, CSAM stood out as the most successful and consistent manager in delivering good returns to equity investors. Other successful managers include Oak Hill Advisors, KKR Financial Advisors, Goldentree Asset Management, Neuberger Berman, Generate Advisors, Fortress Investment Group, and Anchorage Capital Group.

To illustrate these trends, the following table presents the average first-year and second-year annualised prepayment rates for each manager, drawing on data from their seasoned deals that have passed their reinvestment end dates.

The following table presents the average first-year and second-year annualized prepayment rates for each manager, drawing on data from their seasoned deals that have passed their reinvestment end dates.

Recent primary US CLO and reset prints at the AAA–BBB levels suggest that these levels are largely consistent with historical averages.

Please refer to the tables below for historical new issue pricing data of US MM CLO AAA–BBB across various market conditions.

Currently, the new issuance and reset prints of EU CLO AAA tranches are approximately 150 to 155 basis points (bp), significantly diverging from the historical trend with their wider spread.

Please refer to the tables below for historical new issue pricing data of EU CLO BB–B across various market conditions.