November 2023 US Leveraged Highlights
Debtwire today releases the November 2023 US Leveraged Highlights, featuring key trends in the leveraged loan and high-yield bond markets

November 2023 European Leveraged Highlights
Debtwire today releases the November 2023 European Leveraged Highlights, containing key trends in the leveraged loan and high-yield bond markets

European CLOs win out against US deals
Last month, our analysis explored the performance of US CLOs that were previously reset. We found that they delivered higher distributions than deals which weren’t reset, with the exception of the 2017 and 2018 vintages (Creditflux September 2023 — Do resets help CLOs perform better?). This article expands that analysis to the European market, and compares the performance of US BSL and EU CLO equity tranches.

Do resets help CLOs perform better?
As the market for CLO resets opens, we look at the performance of deals that were previously reset, and find they soon deliver higher distributions than those deals that were not reset

Manager tiering matters, but don’t rely on proxies like WAS or WARF
With manager tiering continuing to dominate CLO primary pricing levels we take a look at the 2021 vintage to see how much difference a manager really makes to deal performance

Large CLO managers outperform their smaller peers
Size does matter according to our latest research that finds that larger US CLO managers have consistently outperformed their smaller counterparts.

Secondary CLO prices continued to rise across June
US BWIC secondary prices continued to rise in June, according to a report by KopenTech. 

Question your assumptions
Valuing CLO paper is complicated, and loan prepayments are one of the trickiest parts. When pricing a new issue CLO, the market generally assumes that 15-20% of loans will prepay their principal annually. This prepayment rate is important because it essentially determines the pace at which a CLO’s rated debt is paid off after the reinvestment period, when the CLO pays down its own principal.

Slow pace of loan prepayments increasing CLO tranche WAL, finds Barclays
Prepayment rates in the leveraged loan market have dropped to post-financial crisis lows, thereby increasing CLO debt tranches' weighted average life and slowing the pace of amortization for deals that have left reinvestment, according to new research published by Barclays

Student loans emerge as headwind for loan market, says BofA
American graduates are poised to resume student loan repayments in August, and new research from Bank of America suggests the change could be a headwind for the loan market due to weaker consumer demand.

More than 45% of Euro CLOs to be out of RP by Q1 2024, Fitch says
More than 45% of Fitch-rated reinvesting European CLOs are anticipated to be out of their reinvestment period by the end of Q1 2024, up from around a third as of April, which could lead to rating pressure for mezzanine tranches in those deals

CLOs are our highest-conviction investment category, says Oaktree
Oaktree Capital Management has said that CLOs are the firm's 'highest-conviction investment category' in a credit market outlook study published on Thursday, despite the recent turbulence stemming from the collapse of Silicon Valley Bank

Euro CLO exposure to financial sector 'limited', say Fitch
European CLO exposure to the financial sector is 'limited' and CLO ratings will not be impacted by UBS's acquisition of Credit Suisse, according to new data from Fitch Ratings

Loan trading within European CLOs drops to 0.6%: BofA
European CLO manager trading activity declined sharply this year amid less leveraged loan primary supply and declining secondary liquidity, according to Bank of America research

Investors should pair short CLO triple As with long MBS for best returns, says Janus Henderson
Senior figures at Janus Henderson Investors have recommended that credit investors should pair short duration CLO triple As with longer duration mortgage backed securities to optimise their returns, in a research article published on Tuesday

Five issuers account for 22% of Euro CLO triple Cs: BofA
22% of triple C-rated debt in European CLOs originates from just five issuers, according to analysis from Bank of America research this morning

CLOs cheap to corporates but expensive to agency MBS, says BofA
CLO bonds are currently pricing cheap relative to corporates but look expensive relative to agency MBS bonds, according to new research from Bank of America

CLO bond buckets balloon post-Volcker amendments, says BofA
CLO holdings of bonds in their portfolios has grown to $15 billion in the two years since changes to the Volcker rule allowed CLOs to hold the assets, according to new research from Bank of America

US and European CLO metrics diverge, finds Barclays
CLO spreads saw a month-on-month move wider in December while key portfolio metrics such as weighted average rating factor (warf) and triple C buckets deteriorated in the US. However, European portfolio metrics showed some improvement 

CLO triple A tiering grew to 48bp by December, says PennMutual
The triple A spread differential between top and lower tier CLO managers widened to 48 basis points by the end of 2022 from just 18bp at the start of the year, according to new research published by PennMutual Asset Management

US CLO investors express cautious optimism for 2023
After a turbulent year in 2022, US CLO investors are sounding a cautiously bullish tone heading into 2023

BofA withdraws forecast for US banks to return to CLO investing en masse in 2023
Bank of America has withdrawn its forecast that US banks will make any signficant return to investing in CLOs in 2023 following comments from the Federal Reserve's vice chair for supervision suggesting that capital requirements could increase further next year

European CLO equity outperforms single Bs amid high return dispersion: Bank of America
European CLO returns have been negative across the capital structure this year, a research paper from Bank of America has found. Losses have been softened however due to an increasing three-month Euribor rate, high carry relative to corporates and relatively stable equity returns.

$90 billion gross CLO issuance in 2023 with manager base to shrink, says BofA
Bank of America is forecasting $90 billion gross issuance of CLOs in 2023, split between $80 billion backed by broadly syndicated loans and $10 billion backed by middle market assets

US CLO tranches had best month of year in November: Barclays
CLO debt investors enjoyed their best month of returns for 2022 in November, with triple As returning an annualised excess return of 12% and triple Bs returning 37% on the month