What do reset deals have in common?
Is it possible to predict which deals are likely to be reset next? With reset mania continuing to grip the US CLO market, we search for common factors among 2014-2021 deals that were reset

How many CLOs will be reset?
Tightening liability spreads aren’t just driving record new CLO issuance this year — they’re also triggering a wave of resets and refinancings in the US, especially for broadly syndicated CLOs

How many CLOs will be called this year?
Most CLOs are called when loan market prices are high. Distributions and equity NAV are also important, and they suggest that over 30 2017 and 2018 deals are now ripe for redemption

Ask the market where spreads are heading
Nothing brings the CLO market together like a good moan about the state of the arb. But according to our data, the arbitrage for new-issue US CLOs has remained in the same range for years. 

Banks predict steady year ahead
It’s the season for predictions and the CLO market is no exception, with all the banks having their say. We’ve rounded up their forecasts for new issuance and resets in the US and Europe

How worried should we be about defaults?
As defaults in the US loan market continue to stack up, we investigate the fallout for CLO investors by focusing on the OC tests of double B tranches across 10 years of US CLO vintages

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

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.

Are we ready for another crisis?
Credit managers must brace themselves for stress in 2023, as rates rise and the number of poor performing assets increases. But most CLOs look well-placed and can rely on plump OC cushions 

Not every CLO can be a winner
The CLO industry has undeniably performed well enough to justify the plaudits it receives. But there will always be some unloved CLO tranches that slip into triple C territory

What matters is what you do with it
CLO managers yearn for flexibility so they can take advantage when credit sells off. But it isn’t enough on its own: triple C-flex CLOs saw portfolios erode this year, while CBOs outperformed

We can cope with downgrades again

Arb work pays off
With day-one arbitrage alone delivering projected CLO cash-on-cash returns of 20-25%, 2021 may have been the best year ever for equity investors — at least until CLO spreads began to widen  

I’ll see your 2020 and raise you 2021
Discounted loans, Libor floors and bond flexibility helped make 2021 an even better year for CLO returns than 2020, as US CLOs distributed 15.54% and European CLOs paid 13.93% annualised

CLO managers show respect to their elders
Alongside lucrative new issues, managers also make time for refinancing and resetting old deals. Our data shows that, in 2021, mid-sized firms were the most effective at this balancing act

These CLO docs could be better
It seems there’s not much to worry about if you’re in the CLO market. In Creditflux’s CLO Census, voters said docs should follow a template as Jefferies, AGL and Hayfin emerge as rising stars

Still plenty more fish in the triple C

Coronavirus tiers up old ranking script
Forget everything you thought you knew about CLO manager tiers. Apollo and Blackstone are mainstays, but smaller, more nimble issuers are finding new ways to stand out from the crowd

Woah, we’re halfway there
Judging by the 2020 vintage, European CLO overlap is 50%. But varied approaches to holding bonds and the many loans managers turn down mean there are ways for issuers to outperform

CLOs come up smelling of roses
The coronavirus crisis could have cut back 10 years of CLO market progress, but investors’ foresight, trading chops and flexibility meant many saw their strategies blossom during 2020  

CLOs wheel and deal as overlap increases
2020 CLOs are a different breed to any other vintage. But this cohort features an overlap of almost 40% as CLO issuers have been forced to focus almost entirely on secondary market loans

Waiting for afters
Day one arb remains important, but last year there were opportunities aplenty in the secondary market, which put the onus on printing CLOs and waiting for the day after non-call periods expired

At least 2020 wasn’t dreadful for CLOs
Last year’s downturn was another in which CLOs survived and in many cases thrived as active management and Libor floors helped managers deliver 13%-plus returns to equity

Chin up – it’s been a pretty good effort
CLO managers did well to survive the covid-19 crash in loan valuations — but they failed to fully capitalise on the ensuing volatility, say participants in the Creditflux CLO Census 2020