Freemium

Madison Park Funding XLI (formerly Atrium XII) deal was recently called. This deal, managed by CSAM, was closed in late 2015. The deal’s average equity distribution was very impressive, at 19.1% over a period of around 8 years. This deal did a reset in late 2017, reduced its cost of funding significantly, and distributed excess par upon reset. The deal's solid first distribution of 17.2% certainly helped boost the average annual distribution too. Without the par distributions, the deal's annual distribution would likely be around the 17% mark rather than in the 19% area.

The table below presents the median MVOC (AAA-B) of US BSL CLO deals by vintage, based on asset prices as of January 19, 2024.

Please refer to the table below for a list of EU CLO managers and their assets under management (in billions). In addition, the table indicates the number of years since each manager last priced a primary deal, as of 31 December 2023. Twenty-three managers have not issued a primary deal in over one year, and ten managers have not issued one in over two years.

Please refer to the table below for a comprehensive list of US CLO managers, along with their BSL and MM assets (in billions) under US CLO management, and the number of days since a primary deal was last priced as of 31 December 2023.

MVOC is a crucial point-in-time measure for pricing CLO-rated tranches, closely monitored by both primary and secondary market participants.

Several conclusions can be drawn from the chart. In particular, it appears that debt investors did not really price in the different post-reinvestment prepayment rates given the generic pricing assumptions for new issue deals. This raises the question: Should managers with higher post-reinvestment prepayment rates be priced tighter than those with lower rates?

Approximately one year ago, the CLO industry pondered where new-issue US CLO AAA spreads would land by the end of 2023. As we look ahead, what are your predictions for how the new-issue CLO AAA spreads will evolve by the end of the first half of 2024?

The table below presents some median metrics for each quartile of managers’ performance, based on their annualised alpha metrics from issue dates to 27 November 2023.

Generally, it's assumed that larger managers who buy the market might not perform well. However, an analysis of average alpha performance across categories reveals that larger US CLO managers have consistently outperformed their smaller counterparts, as evidenced by a sample of seasoned deals from 2015 to 2019.

Please see the chart below that displays the DM pricing range (45th to 55th percentile) of primary EU CLO BB tranches...

Please see the chart below that displays the DM pricing range (45th to 55th percentile) of primary US BSL CLO BB tranches...

Equity-friendly deals can typically expect a slower pay-down rate in the first and second years of the post-reinvestment period. These suggested annualized prepayment rates are derived from median metrics.

Please refer to the table below for a list of EU CLO managers and their assets under management (in billions). In addition, the table indicates the number of days since each manager last priced a primary deal, as of 30 September 2023. This information is based on data sourced from LCD and Intex.

Drawing upon EU CLOs from 2013-2022, the underlying collateral maturities for 2024 have witnessed a YTD decline of 67%, a figure attributable to refinancing and extension activities, as well as the redemption of CLOs.

Coincidentally, based on US BSL CLOs from 2012-2022, 2024 underlying collateral maturities experienced a decline of 71%, attributable to the redemption of CLOs, as well as refinancing and extension activities.