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What Asset Spread Compression Means for AAA-to-Single-A EU CLO Pricing

This article examines how US CLO AAA tranches may look under various scenarios.

This article explores the periods during which entry into the EU CLO mezzanine market has historically been more favourable.

A sample of 23 US middle-market CLO deals, closed in 2025 and with reinvestment periods ending between 2029 and 2031, is included in this study.

In aggregate, US CLO managers have reduced their exposure to First Brands loans by around $1.0 billion, while EU CLO managers have reduced theirs by around €282 million. That said, some managers saw an increase in exposure as a result of DIP new money.

This article examines when it is typically a good time to enter the CLO mezzanine market.

Last Thursday saw a remarkable surge in activity, with around US$1.5 billion of US CLO AAAs traded across 62 tranches — averaging around US$24 million per line item and underscoring the market’s deep liquidity.

Around 180 EU CLO deals have been reset at least once since the reset market reopened in September 2023, following a hiatus with no resets priced between April 2022 and August 2023. Of these 180 deals, 71 included additional equity notional at reset, amounting to a combined total of around €1.1 billion.

The table below shows the additional equity notional across reset deals by manager. Among US BSL CLO platforms, Carlyle, Ares, Neuberger Berman, UBS AM, BSP, and CIFC each saw more than...

Across a sample of 238 US BSL CLO deals from the 2018 vintage, average realised AAA WALs have come in shorter than modelled. Refinanced deals shortened the most (by around 1.36 years), liquidated or reset deals were 0.18 years shorter, while the 62 still-outstanding deals are projected to run slightly longer, by about 0.33 years. Overall, the vintage is expected to deliver an average AAA WAL of 5.70 years, roughly 0.42 years shorter than originally modelled.

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.

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.