Primary EU CLO Pricing: Assessing Relative Value Across the Capital Stack
Relative to their year-to-date averages, EU CLO AAA, AA, BB, and single-B tranches are currently screening as cheap.
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Relative to their year-to-date averages, EU CLO AAA, AA, BB, and single-B tranches are currently screening as cheap.
As shown in the first table below, DMs ranged from 102 to 122 and WALs from 0.82 to 2.43 years for selected tighter-print US BSL CLO AAA bonds that traded above par.
Benchmarking EU CLO Pricing Across the Capital Stack
Benchmarking US BSL CLO Pricing Across the Capital Stack
The loan market rally has driven broad spread tightening across the CLO stack. Mezzanine tranches responded the most, reflecting their higher leverage and credit sensitivity. In contrast, senior tranches from top-tier CLOs showed a beta below 1.0, indicating a more muted reaction to loan spread moves.
This article includes several tables showing the average annualised prepayment rates for each seasoned manager in the first, second, third, and fourth years of the post-reinvestment period (post-RP), as well as post-RP prepayment rates for individual deals. The sample includes deals that had exited their reinvestment periods by 31 December 2024.
The loan index used for this analysis is the Morningstar Euro-denominated Leveraged Loan Index.
Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset prices as of June 09, 2025.
Three CLO equity tranches from the 2021 vintage received cover bids ranging widely from 32 to 88. OHA Credit Funding 8 received a notably strong cover of 87.9, translating to an equity...
A sample of 409 seasoned deals (2015–2019* vintage deals) is included in this study. The benchmark loan index used is the Morningstar LSTA U.S. B/BB Ratings Loan Index.
US BSL CLO BB tranches traded yesterday with cover bids ranging from 496 DM to 1,000 DM.
Among the largest managers, RRAM has the most favourable reinvestment period profile across its deals, with none having exited their reinvestment periods as of 31 March 2025.
Last week’s BWIC lists included four majority equity trades according to SCI BWIC data, with cover bids ranging from the single digits to the high 40s. These levels implied an average equity IRR of around 6.6% for primary investors, assuming an issue price of $95. The trades comprised two 2017 vintage deals, one from 2018, and one from 2022.
Of the 80 largest US CLO managers, 18 have a highly favourable CLO AUM breakdown by reinvestment period (RP), with less than 5% of their total US CLO AUM outside of RPs.
With the rally in loan prices, the number of US BSL CLO deals with negative equity NAV has declined from 317 to 168 since 21 April 2025. Among single-B tranches, the number with a market value over-collateralisation (MVOC) below 100% has fallen from 169 to 126 over the same period.
