Since the reset window reopened in mid-2023, managers have actively utilised the reset market to extend the duration of their existing deals. Impressively, seven managers successfully reset at least 10 of their seasoned deals spanning the 2013–2021 vintages. Among them, Oak Hill and CIFC stand out, having reset 15–16 of their seasoned deals during this period.
All things being equal, lower mezzanine tranche investors typically prefer to own deals with a higher probability of being reset.
Notably, Oak Hill, Elmwood, CIFC, CSAM (UBS), Neuberger Berman, and Octagon have excelled in resetting their seasoned deals from the 2013–2021 vintages, particularly from a deal count perspective.
A sample of 67 reset US BSL CLO deals that were priced this year, each with fresh equity injections, is included in this study. The table in this article presents a breakdown of equity injections by manager, shown in terms of notional value, along with the corresponding increase in collateral notional post-reset. This is adjusted to reflect the portion of collateral notional funded by the rise in CLO-rated debt notional. In total, around $1.7 billion in equity notional was injected into these 67 deals. Many of these upsized reset deals have been outstanding for some time and no longer resemble the clean collateral pools they had at issuance. Consequently, part of the new equity capital was allocated to support the reset structure and cover the upfront costs associated with the reset. As a result, original equity investors in some of these reset deals may experience significant dilution of their holdings. Fair pricing of additional equity is crucial to maintaining balance between the original and new equity capital.
The table below presents the pre-reset adjusted triple-C exposure, AAA factor, par loss, and equity NAV for reset deals from the 2014 to 2020 vintages, priced this year.
Please refer to the table below for key metrics of deals just before and after a reset priced in 2024.
