Basic Premium

It is not straightforward to compare annual distributions between performing deals as many variables—such as the amortisation of the class...

Net interest margin (NIM) and the leverage of the CLO structure are among the main driving factors that determine the longer-term equity distribution trend. The net interest margin at the outset is an important number that market participants look at to decide if there is enough arbitrage for equity investors in a stable market condition.

Please see the two tables below for the market share breakdown of CLO collateral administrators in both the US and EU CLO markets.

The pricing of the AIMCO CLO 10 reset was impressive. This reset is accretive, as the deal’s WACC tightened slightly from 177.6 bps to 176.9 bps, and an additional 5 years of reinvestment period were added to the deal. In fact, its reset WACC was the tightest year-to-date in both the reset and primary markets at the time of the pricing.

Notably, Oak Hill, CSAM, GoldenTree, Elmwood, and Blackstone stood out with 10 of their deals ranking in the top 20th percentile among their peers.

This deal was issued in late December 2017 and enjoyed a favorable original WACC of 179 bps. Before the reset, its AAA tranche was amortized to a factor of 66.2% after it passed its reinvestment end date on January 17, 2023.

The second reset of OHA Loan Funding 2016-1, managed by OHA, is accretive as the WACC tightens by 6 bps...

If the loan market continues to grind tighter, with the four-week moving average loan index’s spread migrating into the 360–390 bps range, then AAA prints may tighten to 141-143 bps, using historical trends as a guide.

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

While each CLO deal is different, understanding the historical prepayment rates during the post-RP for each manager remains highly beneficial. Analysing these rates offers insights into the tendencies of different managers, highlighting those who consistently achieve lower prepayment rates and those who tend to experience higher rates in the post-reinvestment phase. In particular, 12 EU CLO managers have kept their annualised prepayment rates in the single digits for the first and second years post-RP, as shown in the table below. Among them, 5 managers have so far demonstrated the ability to keep annualised prepayment rates in the single digits for the first to third years post-RP.

A sample of US BSL CLO 1480 deals is included in this study. The table below lists managers with at least three of their deals in the top quartile. The top five managers with the highest number of deals in the top quartile are Oak Hill Advisors, Golub Capital, CSAM, Benefit Street Partners, and Blackstone.

The reset of Anchorage Capital CLO 7, managed by Anchorage Capital, was quite interesting in a number of ways. Its equity NAV was low (though in line with its peers for the same semi-annual vintage) before the reset, given that this deal was issued almost 9 years ago. Typically, a combination of a class X tranche and/or an injection of equity would be needed. If the deal were liquidated instead of reset, its equity IRR would register around 12%, assuming a par issue price. The decision to reset rather than redeem or sell the equity tranche on the secondary market suggests that this reset is accretive and more lucrative than a full redemption or sale.

The recent reset of Madison Park Funding LIX, managed by CSAM, is accretive as the WACC remains largely the same at around 191-192 bps before and after the reset. Additionally, this deal has been extended by approximately 4.3 years, and its equity notional has increased by $11.18 million.

The manager, Carlyle, has done well in resetting Carlyle U.S. CLO 2017-2, despite having a low MVOC (BB) of around 102% before the reset...

While each CLO deal is different, understanding the historical prepayment rates based on the original collateral balance during the post-RI period for each manager remains highly beneficial. Analyzing these rates offers insights into the tendencies of different managers, highlighting those who consistently achieve lower prepayment rates and those who tend to experience higher rates in the post-reinvestment phase. To illustrate these trends, the following table presents the average first-year, second-year, and third-year annualized prepayment rates for each manager, based on data from their seasoned deals that have passed their reinvestment end dates. These historical post-RI prepayment rates could be useful as cash flow modeling inputs for each manager.