Basic Premium

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.

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%.

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.

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

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.

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.

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.