Leveraged Finance & CLO Essentials

Private Credit & Middle Market CLOs

Middle-Market CLO And Private Credit Quarterly: Navigating The Post-Pandemic Economy

For the third consecutive quarter, U.S. credit estimate downgrades outpaced upgrades as the effect of high-interest burden from the increase in benchmark rates and inflationary pressures challenged companies’ financial and operational performances. During the second quarter, a total of 50 entities were downgraded, bringing the aggregate downgrade for the first half of 2023 to 84. This compares to 22 upgrades in the second quarter and 42 upgrades for the first half of the year, for an overall upgrade-to-downgrade ratio of 1:2.

Middle-market CLOs have seen significant volume this year, even as the corporate credit landscape still faces higher interest rates and slowing growth. Through July 21st, year-to-date BSL CLO issuance is down 37%, while middle-market CLO issuance is up 103% over the same period last year.

U.S. CLOs & Leverage Finance

U.S. BSL CLO Top Obligors And Industries Report: Second-Quarter 2023

S&P Global Ratings has updated its quarterly lists of the top companies with loan issuances held by U.S. broadly syndicated collateralized loan obligations (BSL CLOs) and the industry categories these companies operate within, both ranked on a dollar-weighted basis. The information is based on the most recent trustee reports available to us as of the end of second-quarter 2023.

Full details of the information are available through our interactive dashboard.

Ratings360®

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Europe CLOs & Leverage Finance

European CLOs: The Long Road To Amortization

Fast forward to today, with refinancing and reset activity drying up from Q2 2022 onward, almost 20% of our rated CLOs are now amortizing. Of these, one-third of 'AAA' rated notes have lower credit enhancement than at closing, with several holding more 'CCC' and defaulted assets and some holding negative cash.

We believe recently falling note margins on new issue CLOs will support refinancing and reset activity, with potentially 10 CLOs set to reset this year and over 30 next year, further delaying the amortization phase for CLOs that reset their liabilities.

Relevant Insights

Explore more of our CLO & Leveraged Finance content:

• – Global Leveraged Finance Handbook
• – 2022 Annual U.S. Corporate Default & Rating Transition Study
• – 2022 Annual Global Leveraged Loan CLO Default And Rating Transition Study
• – 2022 Annual European Corporate Default And Rating Transition Study
– Leveraged Finance: Fifth Annual Study Of EBITDA Addbacks Finds Management Continues To Regularly Miss Projections