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It is encouraging to witness the year-to-date (YTD) upward trend in the floating spreads of collateral for EU CLOs, as observed in a sample of 2021 vintage deals. The inherent long-term, non-recourse funding nature of a CLO structure provides managers with an opportunity to navigate challenging environments and bolster their net interest margins during periods of volatility.
Based on a sample of 315 post-2012 US CLO deals that have been fully redeemed (excluding deals with debt impairment), the median deal displayed a collateral pool factor of 67% prior to full redemption. Notably, among these deals, 75% had a collateral pool factor of at least 41%, while 25% surpassed 98%.
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.
Historically, pricing a CLO deal has proven more straightforward when the loan market is robust and stable. As illustrated in the table below, approximately 75% of US CLO deals were priced when the Morningstar LSTA US B-BB Ratings Loan Index's bid price was 97 or above, with around 61% of deals priced at an index bid price of 98 or higher.
The table in this article displays a list of the top 30 largest global CLO managers, ranked by their global CLO assets under management (AUM) in USD billion as of September 30, 2023. Eight managers preside over upwards of $30 billion in global CLO assets. Four amongst the 30 managers ascend to the top 30 list, absent a European CLO platform. In terms of EU CLO AUM as a percentage of global CLO AUM, Investcorp commands the highest percentage at 44%, followed sequentially by CVC, Redding Ridge, HPS, Invesco, KKR, PGIM, Barings and Blackstone.
Below is a table detailing the top 30 EU CLO Managers, along with their EU CLO Assets Under Management (AUM) — represented in billions of Euros (€ BN) — as of 30th September 2023, and the ranking changes within the latest quarter.
Investing in discounted BB-rated CLO tranches can yield significant rewards in the following scenarios:
The due diligence list could be endless. The objective of dedicating many hours to due diligence is to select a manager who not only performs well but also does so consistently. A proven track record of delivering strong investment performance—not merely presenting compelling deal metrics—is key.
The table below shows the latest number of post-2012 US CLO deals that have failed at least one of the key tests – interest diversion, overcollateralization, or interest coverage tests – broken down by vintage.
The table below shows the latest number of post-2012 EU CLO deals that have failed at least one of the key tests – interest diversion, overcollateralization, or interest coverage tests – broken down by vintage.
York CLO-1 has been redeemed, and its equity tranche is expected to surpass the 12% IRR threshold, leading the manager to receive an incentive fee. The redemption of this deal in today’s market conditions highlights its strong performance.
With the current attractive yield offered by new issue US CLO BB tranches, it comes as no surprise that this risk-return profile is generating significant interest. The table below illustrates the projected annual yield of a recently priced US BSL CLO BB tranche.
It is worth noting that the median WAPs (Weighted Average Prices) of US CLOs surpass those of EU CLOs across all vintages. However, when considering the median <70 and <60 price bucket metrics, EU CLOs outperform their US counterparts across all vintages.
Carlyle has witnessed a staggering surge in its US CLO AUM, totaling a remarkable increase of approximately $14.3 billion between January 1, 2022, and June 30, 2023, inclusive of acquisitions.
The table below shows the latest number of post-2012 CLO deals that have failed at least one of the key tests – interest diversion, overcollateralization, or interest coverage tests – broken down by vintage.
