CLO Research

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.

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.

Please refer to the tables below for historical new issue pricing data of US BSL CLO IG (Investment Grade) tranches across various market conditions.

To provide context for the DM (discount margin) figures, consider the following: when the spread of the 4-week Morningstar LSTA U.S. B/BB Ratings Loan Index ranged between 390 and 420 basis points (bp) – which aligns with today’s level – the average pricing for the BB tranche was at 699 bp, with the median at 701 bp, as shown in the table below. This data is derived from a sample of 503 deals, managed by 20 US BSL managers, spanning from 2012 to 2023.

Recent primary CLO and reset prints at the BB level suggest that demand for BB is very strong. Anecdotally, it appears that numerous investors in the market have a preference for the risk-return ratio of the BB tranche. The carry is solid, and the BB tranche has demonstrated resilience across various credit cycles.

The table below displays a list of the top 50 largest global CLO managers, ranked by their global CLO assets under management (AUM) in USD billion as of December 31, 2023.

Last week, GoldenTree achieved a notable AAA print of 150 bp, marking the tightest level since May 2022. This achievement can be attributed to the manager’s established track record, its tier-one status, and the strong demand for AAA.

Excess CCC buckets, defaults, discount obligations, and losses from trading can all reduce the OC ratio. Typically, OC test cushions decrease over time as deals mature. The tables above display the OC (BB) test cushions, segmented by vintage year, based on Intex runs from January 22, 2024, and previously from November 17, 2023.

Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset prices as of January 19, 2023.