EU Module

2025 is on course to be another record-breaking year. This article explores some of the key ingredients behind strong primary issuance.

Yesterday saw active trading in CLO equity. Blackstone, RBC BlueBay, Alcentra, and PGIM See Equity Tranches Stand Out in BWICs

Among 121 EU CLOs that have been, or are expected to be, fully redeemed, equity tranches from the 2020, 2022, and 2023 vintages stand out with strong final IRRs and average equity NAVs above 100%. The analysis also compares outcomes between first-loss and vertical risk retention deals, which so far have shown broadly similar performance. By vintage, reset deals outperformed non-resets across 2013–2016, underscoring the value of resetting.

Yesterday, a majority stake of €13.805 million in Dryden 103 Euro CLO 2021 subordinated notes was traded via BWIC. The deal’s performance is noteworthy: it was priced and closed in late 2022 with very wide liability spreads and a sizeable fixed-rate collateral exposure in a rising rate environment. These factors resulted in sub-par distributions until its reset in late 2024, immediately after the non-call period. At the time, the outlook appeared bleak, with equity NAV depressed and distributions running low. Since bottoming out in mid-2023, however, the deal has staged a steady recovery. Equity NAV rose consistently…

In recent months, a strong loan market, marked by elevated loan prices and ongoing repricing activity, has prompted the redemption of several seasoned EU CLO deals. This article examines a sample of seven EU CLOs that have recently been redeemed.

EU CLO equity has outperformed US CLO equity, based on BWIC colour from a sample of approximately 446 equity tranches traded since July 2024 (source: SCI). This trend is also consistent with findings from 2.0 CLO deals that have been fully liquidated to date, according to CLO Research.

Last week saw several EU CLO equity tranches trade with released cover bids, which are generally viewed as good market practice. Covers are often withheld when investors want to keep the colour, when they are too low, or when traded levels differ significantly.

The reset, priced on 20 June 2025, raised the WACC from 185 bps to 205 bps but extended the reinvestment period by 4.5 years and increased leverage through an additional €28 million in liabilities, including a small Class X tranche.

This study examines a sample of 83 EU CLO equity tranches that have traded via BWIC since July 2024. Based on their disclosed cover prices (as provided by SCI), IRRs are calculated...

Among 123 EU CLO deals that have been or are likely to be fully redeemed, equity tranches from the 2020, 2022, and 2023 vintages stood out with strong final IRRs and average equity NAVs above 100%, as shown in the table above. 11 of the deals were static, with an average IRR of 30.9%. Seven of these were managed by Palmer Square. Static deals can do well in volatile markets by capturing the pull to par of the loan portfolio. If the market stays weak, slower prepayments help preserve leverage—supporting stronger annual distributions. On average, EU CLO managers have met equity investor expectations, with redeemed or soon-to-be-redeemed deals delivering an average equity IRR of 12.3%. This reflects a mix of disciplined issuance, timely resets (notably for 2014–2016 vintages), resilient loan performance, manager expertise, and low liability costs.

ACLO 9X SUB’s estimated initial arbitrage stood at around 225 bps (portfolio discounted spread less cost of funding based on DM). Its strong distribution was partly driven by an outsized first payment of 18.2 points and a highly leveraged structure—nearing 14x collateral-to-equity notional—well above the sub-12x average for H1 2022 deals.

This study includes a sample of 490 EU CLO deals from 2013 to 2023 vintages.

Among managers with two or three deals in the sample, CIFC and Spire Partners have also performed well, with all of their seasoned deals ranking in the top quartile.

Some of the more successful and consistent managers include CSAM, KKR, and CVC. Notably, CSAM, CVC, and KKR are top-ranked, with over 70% of their deals in the sample falling within the top 25%. Among managers with only two or three deals in the sample, Spire Partners and CIFC have also performed well, with at least two-thirds of their deals in the top quartile.

Based on a sample of 116 EU CLO deals that have either already been redeemed or are expected to be fully redeemed soon, equity tranches from the 2020, 2022, and 2023 vintages delivered particularly strong returns. These deals stood out with impressive final IRRs, supported by healthy equity NAVs at exit. The final table in this article presents each manager’s average IRR, annual distribution, and equity NAV across their redeemed deals, along with the percentage of those deals that ranked in the top quartile for equity IRR performance. Of the 41 managers in the sample, 23 achieved an average equity IRR of 10% or higher on their redeemed CLOs.