CLO Market Musings 13 – Call Timing and WAL Test Extension
CLO deals are typically called during periods of strength in the loan market. For instance, approximately 85% of the more...
CLO deals are typically called during periods of strength in the loan market. For instance, approximately 85% of the more...
Generally speaking, in a robust loan market with a good portion of loans trading above par, borrowers often take advantage of prepayment options to refinance their debts at lower spreads. However, whenever the market weakens, lenders are left with limited options to improve the spreads of their assets.
Please see the table below for the CLO assets under management (billion) breakdown by reinvestment (RI) period and reported WAL Test cushion as of 31 March 2023 based on LCD and Intex data.
CLO collateral WAL test cushions play a vital role in allowing CLO managers to optimise underlying collateral spreads through trading, purchasing new long-dated assets, or amending and extending existing ones. This article provides an overview of EU CLO assets under management (in billions), broken down by reinvestment (RI) period and reported WAL test cushion, as of 31 March 2023.
It is quite evident that deals with a good level of WAL test cushions tend to experience lower prepayment rates.
US CLO Managers: Number Of Deals With Failing WAL Tests The collateral weighted average life (WAL) test is important to...
