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Single-B tranches, given their position as second-loss in the CLO structure, are particularly exposed to idiosyncratic risk and may face heightened scrutiny in the aftermath of the First Brands episode.
The reset of Carlyle Global Market Strategies Euro CLO 2015-1 priced yesterday. The deal, originally closed in March 2015, was refinanced in April 2017 and first reset in February 2020.
A review of 65 CLO deals from the 2017–2018 vintages shows that realised WALs for senior AAA tranches averaged 5.65 years, around 0.15 years longer than modelled at issuance. While some deals delivered shorter WALs—benefiting investors given the typically upward-sloping AAA term curve—others faced significant extensions to the disadvantage of AAA holders.
Among the top 20 global CLO managers by collateral assets under management (as of 30 June 2025), 11 have no exposure (or only minimal exposure) to First Brands in either their US or EU CLOs. Notably, some global managers show exposure in their US CLOs but not in their EU CLOs (or only minimal exposure), and vice versa.
This article examines how US CLO managers’ performance has been affected by their exposure to First Brands. Around 991 deals across 67 US CLO managers have exposure to First Brands, with a median deal exposure of 0.51%. For 90% of these deals, exposure falls between 0.16% and 1.26%.
Around 193 deals across 23 EU CLO managers have exposure to First Brands, with median deal exposure of 0.62%. The impact on MVOC rankings differs by manager. The table below highlights changes in rankings for these 23 managers since 5 September 2025.
Birch Grove CLO 7’s highly accretive reset reduced its WACC by 90.8 bps, from 252.6 bps to 161.8 bps, and extended its reinvestment period by two years. The funding cost savings more than offset the decline in its reported WAS since first reporting—down by around 50.6 bps to the latest figure of 322.3 bps.
Yesterday saw 11 US BSL CLO BB tranches on BWIC, with cover bids ranging from a tight 464 DM to 738 DM.
The table below presents the average annualised prepayment rates for each seasoned manager during the first, second, third, and fourth years of the post-reinvestment period (post-RP). The sample includes deals that had exited their reinvestment periods by 31 December 2024. Deals that were called or reset are also included, reflecting their pre-call and pre-reset historical post-RP prepayment rates.
Loan Repricing Pressures Persist with Rising Par-and-Above Bucket
Otranto Park CLO’s reset was notable, with the AAA tranche pricing at 130 bps. The reset extended the reinvestment end date from November 15, 2026, to April 15, 2030, while reducing the WACC by about 6 bps, from 203.3 bps to 197.2 bps. Although the deal had to pay up for its reset AAA given the current CLO AAA market, the cost savings from the AA through single-B tranches more than offset the wider AAA pricing.
Three US BSL CLO BB tranches traded last Friday. One older deal saw a wide cover bid near 1,000 DM, weighed down by a low MVOC and negative clean equity NAV. Another tranche cleared around 900 DM, supported by an MVOC of about 101% and a slightly positive equity NAV. By contrast, a more recent tranche attracted an above-par cover bid, with DM-to-call and DM-to-maturity in the high 500–600 bps range.
To the satisfaction of AAA investors, the reset of RRE 1 Loan Management CLO proved accretive, as they were repaid at par on the reset date rather than waiting for quarterly prepayments, which would ordinarily have taken many quarters to return the full principal. The deal was originally priced in 2019 and was later refinanced, closing on 15 April 2021, with the AAA tranche printing at just 82 bps.
AIMCO 1 was priced with a closing date of April 8, 2021, and a reinvestment end date of April 20, 2026. Its original AAA tranche priced at 125.161 bps over SOFR (equivalent to 99 bps over LIBOR). With this reset, the WAL of the original AAA would be reduced to 4.5 years, compared with the originally modeled WAL of about 6.4 years.
While the headline levels may appear tight, the tranche offers strong value to AAA investors...
