US and EU CLO BB MVOC by Vintage (as of 25 May 2022)
- Market Value Over-Collateralisation (MVOC) (say, at the BB tranche level) is calculated by dividing the collateral MV by the sum of CLO liabilities (AAA to BB).
- Market participants focus a lot on this number – which is a point in time metric – as it is an important metric for pricing CLO rated tranches. In other words, CLO rated tranches trade on the back of the loan market. CLO BB tranches could also be seen as a levered exposure to the loan market.
The table below shows the MVOC metrics (at the BB-rated tranche level) of US BSL CLO deals* by vintage based on loan prices as of 25 May 2022.
- MVOC metrics look quite stressed today, given the weak loan market.
- 2014 vintage deals have the lowest average MVOC, while 2020 vintage deals have the highest MVOC on average.
- Around 15% of the deals in the sample saw an MVOC ratio of less than 100.
A CLO capital structure is a function of key factors such as the reinvestment period, maturity date, WARF, and diversity score. In other words, the inherent leverage within the CLO capital structure is driven by these factors. An EU CLO structure is typically less levered than a US CLO structure, largely due to the less diversified nature of the underlying collateral pools, among other factors.
The following table shows the MVOC metrics (at the BB-rated tranche level) of EU CLO deals* by vintage based on loan prices as of 25 May 2022.
- Notably, more seasoned EU CLO deals (2013– 2015 vintage deals) have generally done reasonably well.
- None of the EU CLO deals saw an MVOC ratio of less than 100.
* Deals with less than a 100million collateral notional outstanding are excluded.
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