Considering the current CLO equity NAV metrics for the seasoned deals, it is highly unlikely that these deals would be redeemed, even if their equity distributions are poor and they appear ripe for a call.
Typically, newer vintage deals tend to be 'cleaner,' but apparently, the 2021 EU CLO single-B MVOC metrics do not look as good compared to those of more seasoned deals (2016-2020). The next table shows the BB MVOC metrics for each semi-annual vintage. Notably, the 2H 2022 and 1H 2023 semi-annual vintage deals have some of the best MVOC metrics.
According to Moody’s, it is anticipated that four industries will experience a default rate exceeding 4.0% within the next year. Notably, EU CLOs have a fair amount of exposure to only one out of these four industries, as illustrated in the table. Furthermore, Moody’s projects that only one industry – retail – will witness a default rate surpassing 5.0% over the course of one year. EU CLOs have limited exposure to this industry.
Overweight indicates that the manager’s average industry exposure exceeds the sample average exposure by 1 percentage point. Conversely, underweight means the manager’s average industry exposure is less than the industry average exposure by 1 percentage point.
The top-performing US CLO managers have been identified based on their total return alpha performance, as evaluated across a sample of 177 deals issued in 2021. Out of a total of 64 managers, the top five managers have been analyzed for their industry overweight/underweight. The table below illustrates their latest overweight/underweight standings.
The table below displays the average exposure of US CLO managers to price buckets below $80, $70 and $60, based...
Tracking price buckets at 80/70/60 or below for CLO underlying collateral can be useful in assessing tail risk in the...
The table shows the latest CLO collateral weighted average prices (WAPs) across vintages for both US and EU CLOs. WAP...
Typically, newer vintage deals tend to be 'cleaner,' but apparently, the 2021 EU CLO equity NAV metrics do not look as good compared to those of more seasoned deals (2019-2020). Another noteworthy aspect that deserves emphasis is the positive dispersion observed in the BB MVOC and equity NAV metrics among the 2022 vintage deals. Specifically, the following deals have demonstrated significant success from the BB MVOC perspective.
Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset...
The absence of CLO arbitrage has been garnering significant attention recently. This concept encompasses several facets, most notably the initial net interest margin of a CLO deal. However, in periods of loan market volatility, the importance of the initial net interest margin diminishes somewhat, as market participants redirect their focus towards the enticing potential rewards associated with the rise in equity NAV.
CLO deals are typically called during periods of strength in the loan market. For instance, approximately 85% of the more...
MVOC serves as a pivotal point-in-time indicator, shaping the pricing of CLO-rated tranches, while drawing the keen attention of primary and secondary market participants.
Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset...
The table below shows the relative rankings of the largest EU CLO managers based on their latest average total alpha metrics (as of May 5th, 2023). For example, a score of 78% indicates that a manager's total return alpha is in the 78th percentile, meaning their metric is greater than that of 78% of their peers. Check out the rankings to see how these large managers compare in terms of performance!
