Equity Performance of EU CLO Deals that Have Funded Their Delayed-Draw Tranches
The following EU CLO deals issued and priced their single-B tranches this year. These tranches were originally structured for delayed...
The following EU CLO deals issued and priced their single-B tranches this year. These tranches were originally structured for delayed...
A sample of 1,460 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool factor below 60% are excluded.
A sample of 506 EU CLO deals (vintage 2013–1H 2024) is included in this study. Deals with a collateral pool factor below 60% are excluded.
The table below presents the estimated historical median pricing DMs for AAA, AA, A, BBB, and BB tranches when the...
The loan index’s moving 4-week average discounted spreads are used as a proxy for the discounted spreads of US BSL CLO portfolios. If the index prices fell below 96, 4-year discounted asset spreads were used instead of spreads to maturity. Arbitrage refers to the index’s discounted spread net of the cost of funding, based on discount margins (of AAA–BB tranches of top-tier deals) rather than spreads. New issue upfront costs and management fees are not accounted for. The loan index used for this analysis is the Morningstar LSTA US B-BB Ratings Loan Index.
As illustrated in the table below, it is unsurprising that when the underlying loan market was strong, more CLO deals were liquidated, institutional loan issuance increased—providing additional collateral assets for CLO creation—and demand for CLOs grew as investors became more optimistic about the credit outlook. Combined with a higher interest rate environment and greater demand for floating-rate assets, these factors contributed to a record-breaking year for new issue CLO volume in 2024.
Over the past year, the clopremium.co.uk website has welcomed over 23,000 users, including many returning visitors.
Have you ever wondered how CLO tranche ratings—AAA, AA, A, BBB, and BB—are derived from a portfolio of non-investment grade loans?
Asset spreads play a significant role in influencing AAA issuance spreads, though the relationship is not always perfectly linear due to factors such as the demand and supply of AAA notes. This article notes that current top-tier AAA levels, at approximately 124–126 bps, are elevated compared to historical norms.
This analysis examines a sample of 979 deals currently within their reinvestment periods.
Since the reset window reopened in mid-2023, managers have actively utilised the reset market to extend the duration of their existing deals. Impressively, seven managers successfully reset at least 10 of their seasoned deals spanning the 2013–2021 vintages. Among them, Oak Hill and CIFC stand out, having reset 15–16 of their seasoned deals during this period.
The equity tranche IRRs for 2.0 US CLO deals by vintage are summarised in the table below, based on a sample of 619 fully redeemed deals from the 2012–2020 vintages. An issue price of $95 has been assumed, with residual values and incentive fees factored into the IRR calculations. The final equity NAV includes both the last equity distribution and accrued interest.
December 2024: Summary of CLO Research Insights
Market Value Over-Collateralization (MVOC), for instance, at the BB tranche level, is calculated by dividing the collateral market value (MV) by the sum of CLO liabilities (AAA to BB). MVOC is a key point-in-time metric for valuing CLO-rated tranches, widely tracked by participants in both primary and secondary markets.
Market Value Over-Collateralization (MVOC), for instance, at the BB tranche level, is calculated by dividing the collateral market value (MV) by the sum of CLO liabilities (AAA to BB). MVOC is a crucial point-in-time metric for pricing CLO-rated tranches, closely monitored by primary and secondary market participants.