Tag Archives: AAA

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.

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.

Last Friday saw several seasoned EU CLO AAA tranches trade, with cover bids ranging from 79 DM to 101 DM, corresponding to WALs of 0.85 to 2.8 years. A spread difference of around 22 bps for roughly two years’ difference in WAL highlights the important role WAL plays in AAA pricing.

To the satisfaction of AAA investors, the reset of RRE 1 Loan Management CLO proved accretive, as they were repaid at par on the reset date rather than waiting for quarterly prepayments, which would ordinarily have taken many quarters to return the full principal. The deal was originally priced in 2019 and was later refinanced, closing on 15 April 2021, with the AAA tranche printing at just 82 bps.

Last week, Palmer Square European Loan Funding 2025-3, a static deal, priced its AAA tranche at 93 DM with a WAL of around 1.9 years. On Monday, a relatively broad list of seasoned AAA tranches changed hands; a selected set of benchmark levels, albeit in small notionals, is shown in the table below. CARPK 2021-1X A1 could likely have cleared at a slightly wider DM had it been a par or above-par bond.

Four top-tier reset AAA prints at 125bps were reported recently, each showing a different value relative to risk.