Basic Premium

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.

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.

A total of 317 US BSL CLO deals are now showing a negative equity NAV, including 95 deals from the 2018 vintage. Among single-B tranches, 169 out of 411 deals—or 41%—have an MVOC below par.

Late last week, approximately $240 million of long-dated AAA tranches (with reinvestment periods ending between 2029-2030) changed hands, as shown in the table below. Top-tier prints were mainly in the 150 DM area. For example, MAGNE 2024-42A A1 traded with a cover bid of 150 DM.

Whether it makes sense or not depends on the WAP of the CLO portfolio purchased. The table below illustrates the arbitrage levels under various WAP scenarios.

The table below shows the impact of the recent dislocation on the mark-to-market (MTM) of a typical top-tier primary deal priced around two months ago. So far, the AAA–AA tranches have held up well, showing resilience with price movements smaller than those of the loan index over the same period. The BB tranche, however, was more severely impacted due to its very tight coupon and the long WAL of the tranche.

The timing of the current market volatility is particularly challenging for many seasoned deals, which had already been impacted by successive waves of loan repricing and are now facing renewed pressure on NAVs.

Weakness in the loan market has led to a broad-based widening of discount margins across the CLO capital structure, with lower mezzanine tranches exhibiting the greatest spread sensitivity — reflecting their structurally leveraged exposure to underlying credit risk. By contrast, senior tranches (AAA/AA) of top-tier primary CLOs show a beta of less than 0.3 to loan market movements, indicating more muted spread volatility in response to changes in collateral spreads. Trinitas Euro CLO IX priced particularly well, achieving a WACC of just 205 bps, supported by solid pricing on the AAA and AA tranches.

Although too much should not be read into last Friday’s BWIC trading colour for EU CLO AAA tranches—given the relatively small notionals involved—these trades still offer valuable insight into current secondary AAA pricing.

The recent pricing of Trinitas Euro CLO IX was particularly impressive, with a WACC of just 205 bps, compared to the estimated four-week average discounted spread of 442bps on the loan index.

This suggests that mezzanine and equity US CLO tranches are likely to become significantly more volatile than before. As of the time of writing, nearly 20% of US BSL CLO deals from the 2012–2013 vintages have MVOCs below 100%. With MVOCs under pressure, the reset market may effectively be closed to most seasoned deals.

A total of 330 US BSL CLO deals are now showing a negative equity NAV, including 97 deals from the 2018 vintage.

A sample of 1,426 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool...

A sample of 494 EU CLO deals (vintage 2013–1H 2024) is included in this study. Deals with a collateral pool...

As of April 4, 2025, the latest arbitrage metric for US CLOs was recorded at around 214 bps.