Basic Premium

The loan index’s moving 4-week average discounted spreads are used as a proxy for the EU CLO portfolios’ discounted spreads. Arbitrage refers to the index’s discounted spread net of the cost of funding, based on discount margins (of AAA–B tranches) rather than spreads. Upfront costs and management fees are not accounted for. The loan index used for this analysis is the Morningstar Euro-denominated Leveraged Loan Index.

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.

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.

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.

CLO managers, on average, have closely tracked the loan index in 2024, following a period of relative outperformance of 10–20 bps from 2021 to 2023.

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

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.

Please find below a table showing the published average senior and junior management fee breakdown by US BSL CLO manager. Static deals are excluded from the calculation. Of the 126 managers listed, 68 on average charge over 40 bps, 51 charge between 30 and 40 bps, and 5 charge between 20 and 30 bps.

Notably, Oak Hill, Elmwood, CIFC, CSAM (UBS), Neuberger Berman, and Octagon have excelled in resetting their seasoned deals from the 2013–2021 vintages, particularly from a deal count perspective.

A sample of 1,497 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool...

To explore the relationship between trading activity and a deal’s MVOC performance, a sample of 95 EU CLO deals closed...

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.

Although each CLO deal is unique, examining historical prepayment rates based on the original collateral balance during the post-reinvestment period...

Although every CLO deal is unique, analysing historical prepayment rates during the post-RP period is valuable. It reveals manager tendencies, distinguishing those who consistently deliver lower prepayment rates from those with higher rates.