- It might be assumed that managers with higher Weighted Average Spreads (WAS) tend to carry a higher collateral risk profile and, on average, experience greater realised and unrealised principal losses when adjusted for vintage. Conversely, more conservative managers with lower WAS often demonstrate greater resilience, leading to lower levels of principal loss, also adjusted for vintage. However, a lower WAS does not always indicate a cleaner US BSL CLO collateral pool. Rethinking WAS: Decoupling Spread Levels from Risk in US CLO Portfolios
- As of 25 October 2024, the latest EU CLO arb metric was recorded at 254 bps, significantly higher than the median value of 219 bps for 2023. Monitor: EU CLO New Issue Arbitrage Trend
- As of October 25, 2024, the latest US BSL CLO arbitrage metric was recorded at 220 bps. In fact, the arbitrage metrics have been range-bound between 220 bps and 230 bps since the end of June 2024. US BSL CLOs: Weekly Arbitrage Metrics
- The table in this article shows the pre-reset adjusted triple-C exposure for reset EU CLO deals from the 2014 to 2019 vintages, priced within the past month. The median pre-reset triple-C exposure was 6.5% based on Moody’s ratings, 4.3% based on S&P ratings, and 5.8% based on Fitch ratings. EU CLOs: Adjusted Pre-Reset Triple-C Exposure
- Thirteen EU CLO deals distributed over 15% to equity holders upon reset. Issued between Q2 2022 and Q2 2023, these deals accumulated excess par within their structures, enabling the issuance of additional rated debt and allowing some of the excess par to be returned to equity investors. EU CLOs: Unpacking the Impact of Recent Resets
- On average, EU CLO managers are now matching the return performance of the Morningstar European Euro-Denominated Loan Index across various metrics. Please note that individual manager performance can vary significantly, and investors should not assume that CLO managers eliminate risk. Seasoned EU CLO Managers: Trends in Total, MV, and Interest Return Alpha (Updated).
- A sample of 1,549 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool factor below 60% are excluded. Market Value Over-Collateralization (MVOC), for instance, at the BB tranche level, is calculated by dividing the collateral market value (MV) by the sum of CLO liabilities (AAA to BB). MVOC is a crucial point-in-time metric for pricing CLO-rated tranches, closely monitored by primary and secondary market participants. Notably, Silver Point Capital, L.P., Whitebox Advisors, and New Mountain Capital stood out as top performers among US BSL CLO managers with 3-9 deals in the sample. US BSL CLO Managers: Rankings Based on MVOC (BB)
- Resets can add substantial value for both debt and equity investors. Lower mezzanine tranche investors, in particular, typically favor deals with a higher probability of being reset. If deals are not performing as expected, some of these lower mezzanine tranches with low MVOC would likely be quoted at a discount, even in a strong loan market. Upon reset, these tranches would be pulled to par. Resets also provide significant value to equity investors. For instance, an analysis of 2014 redeemed US CLO deals shows that reset deals outperformed refinanced deals by a considerable margin in terms of final equity IRRs. Resets: Seasoned Managers Who Have Done Well (Updated)
- Based on a sample of 83 EU CLO deals that have either already been redeemed or are expected to be fully redeemed soon, CLO equity tranches from the 2020, 2022, and 2023 vintages stood out, delivering impressive final IRRs supported by strong equity NAV metrics. As shown in the table in this article, their average equity NAVs exceeded 100%, highlighting robust performance. On average, EU CLO managers have met the expectations of their equity investors. Overall, based on deals that have already been redeemed or are anticipated to be redeemed, EU CLOs have delivered good performance, with an average equity IRR of 12.8%, assuming an issue price of €95. Post-2013 EU CLO Equity IRRs by Vintage
- Edmondstown Park CLO, managed by Blackstone and arranged by BNPP, has performed exceptionally well, with an expected net equity IRR exceeding 32%, based on an assumed issue price at par. The Class E notes (BB-/BB-) also performed remarkably well, having been priced at a steep discount, as evidenced by their issue price of 85%. This tranche achieved an IRR of 22.5%. The Class D notes (BBB-/BBB-), issued at 97%, also delivered an impressive IRR of 12.1%, particularly given its investment-grade risk profile. Edmondstown Park CLO: Robust IRR Performance Across the Capital Stack
- CLO Research has recently published updated performance reports for individual managers, highlighting alpha trends for each seasoned manager since early 2020.
EU CLO Manager Report: Redding Ridge
EU CLO Manager Report: KKR
EU CLO Manager Report: Cairn Loan Investments
EU CLO Manager Report: Blackstone
EU CLO Manager Report: CVC
EU CLO Manager Report: Sound Point
EU CLO Manager Report: Brigade
EU CLO Manager Report: Spire
EU CLO Manager Report: Five Arrows
EU CLO Manager Report: Investcorp
EU CLO Manager Report: Chenavari
EU CLO Manager Report: Carlyle
EU CLO Manager Report: Ares
EU CLO Manager Report: Sculptor
EU CLO Manager Report: Voya
EU CLO Manager Report: CSAM
EU CLO Manager Report: PGIM
EU CLO Manager Report: ICG
EU CLO Manager Report: Blackrock
EU CLO Manager Report: Tikehau
EU CLO Manager Report: Barings
EU CLO Manager Report: Bain
EU CLO Manager Report: Partners Group
EU CLO Manager Report: Hayfin
EU CLO Manager Report: Invesco
EU CLO Manager Report: Tikehau
Disclaimers
The information, research, data, research-related opinions, observations, and estimates contained in this document have been compiled or arrived at by CLO Research Group, based upon sources believed to be reliable and accurate, and in good faith, but in each case without further investigation. None of CLO Research Group or its service providers; authorised personnel, or their directors make any expressed or implied presentation or warranty, nor do any of such persons accept any responsibility or liability as to the accuracy, timeliness, completeness, or correctness of such sources and the information, research, data, research related opinions, observations and estimates contained in this document. All information, research, data, research-related opinions, observations, and estimates in this document are in draft form as of the date of this document and remain subject to change and amendment without notice. Neither CLO Research Group nor any of their third-party providers shall be subject to any damages or liability for any errors, omissions, incompleteness, or incorrectness of this document. This article is not and should not be construed as an offer, or a solicitation of an offer, to buy or sell securities and shall not be relied upon as a promise or representation regarding the historical or current position or performance of any of the deals or issues mentioned in it.
