- Ninety-three issuers ended fourth-quarter 2019 with lower ratings, while 29 issuers ended the quarter with higher ratings.
- S&P Global Ratings downgraded its ratings on 21 classes of mezzanine and junior notes, mostly from older vintage CLO 2.0s in the latter part of 2019.
- Investor attention to the performance of the underlying entities in CLOs this late in the credit cycle, and the potential consequences for those CLOs, has increased.
- This new quarterly publication provides further insights into these corporate rating actions as well as the exposures CLO managers have to these downgraded and upgraded issuers across their reinvesting CLOs.
S&P Global Ratings did not take any rating actions on tranches from reinvesting U.S. broadly syndicated loan (BSL) collateralized loan obligations (CLOs) during the fourth quarter of 2019. We did, however, downgrade our ratings on 21 classes of mezzanine and junior notes, mostly from older vintage CLO 2.0s in the latter part of 2019, see "63 U.S. CLO Ratings Raised, 21 Lowered, And 266 Affirmed After June 2019 UCO Placements Resolved," published Dec. 18, 2019). Credit deterioration and par loss in CLOs mostly stemmed from credit deterioration and rating actions taken on corporate entities that issued loans collateralizing these CLOs. Negative rating actions on the loan issuers can directly affect both a CLO's portfolio credit quality as well as its structure (through overcollateralization [O/C] tests and other tests). Given the increased investor attention to the performance of the underlying entities of CLOs in this late credit cycle, and the potential consequences for CLOs, we are launching this quarterly publication to provide further insights into these corporate rating actions as well as the exposures CLO managers have to these downgraded and upgraded issuers across their reinvesting CLOs. Because reinvesting CLOs are actively managed structures, there can be a high degree of variance between transactions based on the CLO managers' strategy.
Fourth-Quarter 2019: The Issuer Rating Experience
Ninety-three issuers with loans held in reinvesting S&P-rated U.S. BSL CLOs ended fourth-quarter 2019 with ratings that were lower than they were at the start of the quarter, while 29 issuers ended the quarter with ratings that were higher (full list appended in tables 2 and 3 in the Appendix). The range of the rating actions affected on the underlying entities between the start and end of fourth-quarter 2019 spanned minus four notches to plus five notches. The rating changes, both positive and negative, ranged between widely held issuers (within top 250 list) to thinly held issuers, and across a wide range of industries.
|Issuer Rating Experience In Fourth-Quarter 2019|
|Based on loans held in S&P-rated U.S. BSL CLOs||Ratings lowered in fourth quarter||Average fourth-quarter price drop|
|Ratings lowered to 'B-'||27||(2.71)|
|Ratings lowered into 'CCC' category||12||(10.88)|
|Ratings lowered into nonperforming||9||(10.63)|
|BSL--Broadly syndicated loan. CLO--Collateralized loan obligation.|
|Impact On CLO Insights Index|
|Based on CLOs in CLO Insights Index||Third-quarter 2019 (%)||Fourth-quarter 2019 (%)||Change in fourth-quarter 2019 (%)|
|Junior O/C cushion||4.14||3.69||(0.46)|
|BSL--Broadly syndicated loans. CLO--Collateralized loan obligation. O/C--Overcollateralization.|
CLO Market Participants Wary Of Downgrades Into 'CCC' Range And Nonperforming Category
For CLO market participants, the downgrade of issuers into the 'CCC' ('CCC+', 'CCC', 'CCC-') and nonperforming rating categories ('CC', 'SD', 'D') is of "notable" concern on account of the potential impact to payment waterfall sequences arising from the haircuts applied to the O/C numerator (see CLO primer "S&P Global Ratings' CLO Primer," published Sept. 21, 2018, for the mechanics of the O/C test).
In the fourth quarter, the U.S. CLO index (see "SF Credit Brief: Wrap Up Of 2019 U.S. CLO," published Jan. 29, 2019, and our CLO Insights newsletter) experienced a favorable 32 basis point (bp) decline in 'CCC' exposure (to 4.64% from 4.97%), an adverse 39 bp increase in nonperforming loans (to 0.67% from 0.28%), along with an adverse 13 bp decline in par (to 29 bp from 15 bp, relative to the par balance at the start of 2019). As a result of these net changes, the cushion of the junior O/C tests declined by 46 bps during this time to the lowest point in 2019 (to 3.69% from 4.14%). Some deals within this index were close to failing their junior O/C tests at the end of 2019.
Some of the widely held names that saw their 'CCC' category ratings lowered to nonperforming include McDermott and Murray Energy (which were the 76th- and 177th-largest CLO holdings, respectively, at the end of the third-quarter 2019 and 95th and 192nd, respectively, by the end of fourth quarter 2019). Widespread exposure to these companies caused a decline in the average 'CCC' holdings and an increase in average exposure to nonperforming, as noted above. There weren't many widely held names that were downgraded into the 'CCC' category (another reason for the overall decline in the 'CCC' category exposure in fourth-quarter 2019), but some of the less widely held names like Southern Graphics, Gulf Finance, and Rodan & Fields did get downgraded into the 'CCC' category. There were several issuers that saw their ratings lowered to 'B-'; some of the widely held issuers include Neustar Inc. (Aerial Parent Corp.), Boxer (Banff Parent Inc.), Team Health, and Proampac.
By the end of fourth-quarter 2019, 12 issuers saw their ratings lowered into the 'CCC' category, while nine issuers saw their ratings lowered into the nonperforming category (from 'CCC-' or above), the "notable" downgrades. Just a few sparsely held issuers saw their ratings raised out of the 'CCC' and nonperforming categories, so the positive impact from these upgrades were far less pronounced than the negative impact from the downgrades. To help illustrate the variance across manager exposures to the "notable" downgrades, see chart 1. We list 18 CLO managers that manage eight or more reinvesting S&P-rated U.S. BSL CLOs (see table 4 below for the exposures to downgrades and upgrades across 81 managers). The chart below shows the level of manager exposures (across their CLOs as of third-quarter 2019) to the issuers that saw their ratings lowered into the 'CCC' and nonperforming categories by the end of fourth-quarter 2019 (the width of the connecting lines indicate the overall volume of exposure across the portfolios per CLO manager).
Ratings entering into 'CCC' and below category saw notable drops in price
The price of loans to issuers that ended fourth-quarter 2019 with a lower rating also saw a drop in prices during the quarter (see table 1A above). While we don't know for certain, selling after the downgrade may have led to a drop in par for the portfolios (as noted above, the average drop in par in fourth-quarter 2019 was about 13 bp amongst the portfolios in the CLO Insights index). As expected, ratings that enter the 'CCC' or nonperforming categories in fourth-quarter 2019 saw notable drops in price, likely due to a decrease in demand from other CLOs (due to potential O/C haircut implications).
Even though 'B-' issuer exposure (if not on Watch Negative) generally does not have O/C haircut implications, market prices for loans from issuers that were downgraded to 'B-' in fourth-quarter 2019 suffered an average drop in price of about 2.8. There is a wide range of prices for loans from 'B-' rated issuers (which currently make up about one fifth of overall US BSL CLO exposures). This is especially true for loans whose issuers were downgraded to 'B-', as opposed to loans whose issuers were initially rated 'B-'.
One feature of the corporate ratings landscape over the last couple of years has been the large volume of newly rated 'B-' issuers, many of whose loans have ended up in CLOs, along with those of 'B-' issuers that were downgraded to that rating level.
As we noted last month, companies in this "newbie" 'B' rating bucket voluntarily stomach more debt at low borrowing costs to quickly scale up; in other words, they often sell a growth story. On the other side, existing 'B-' rated companies, especially those that landed in 'B-' from a higher rating, are more likely to face ongoing secular headwinds or experience individual operating challenges, momentum that could depress a company's margins or impair its ability to make necessary investment to sustain margins. The old saying that "there is no such thing as one bad quarter" could explain the focus on new versus newly downgraded 'B-'.
Pulling the (downgrade) trigger
In looking at how close certain 'B-/Stable' and 'B-/Negative' (or Watch Negative) credits are to their downgrade triggers, we see that not all have traditional downgrade triggers tied to the "Big 3" (debt to EBITDA, EBIT to interest coverage, and funds from operations to debt). For example, it's not uncommon for a downgrade trigger to the 'CCC' category to include the concept of an unstainable capital structure or a liquidity metric.
As such, we looked at issuers as of year-end 2019 that have some or all of those "Big 3" triggers. We focused in particular on debt-to-EBITDA triggers since that was the most common credit metric when one was used. While this sample size is far smaller than all 'B-' credits, we believe it provides some interesting insights (some of these companies have had rating actions taken subsequently).
About 60% of the sample of issuers rated 'B-/Negative' (or Watch Negative) are at or very close to their downgrade triggers with very limited room (other factors such liquidity or non-quantitative metrics could also play a role in any downgrade decision), while another 10% have what we termed tight cushion to the leverage trigger: between one and two turns of leverage. Another roughly 30% have modest cushion, or about 2x-3x of leverage cushion or better (see chart 2).
Looking at the 'B-/Stable' cohort, it's clear that relative to downgrade metrics, these issuers have more cushion: 29% have two turns of leverage or more, but 37% have very limited room for error (see chart 3).
Another way to think about the 'CCC' pipeline from the 'B' category is to consider what would happen if all 'B-/Negative' (or Watch Negative) borrowers were downgraded to the 'CCC' category. In this case, the 'CCC' category percentage of the universe of 'B-' and below would rise sharply and be about equal to the roughly 46% level reached during the financial crisis.
What's On Deck For Potential Default?
It's important to remember that CLO exposure to various corporate sectors is a manager choice (within transaction parameters), and does not necessarily reflect an equally diversified and sectorally distributed portfolio. That said, the potential for defaults across industries is driven more by sectoral stress, and thus is not uniform as some 60% of defaults in 2019 were from the consumer products; the metals, mining, and steel; the oil and gas; and the retail and restaurants sectors (see chart 4). Therefore, we believe CLO investors should pay close attention to both sides of the equation: the individual corporate sector risks, especially the 'B-' and 'CCC' buckets, as well as CLO exposures to certain issuers.
|Issuers With Loans Held In U.S. BSL CLOs That Ended Fourth Quarter With A Lower Rating|
|Issuer||Third-quarter 2019 rating||Fourth-quarter 2019 rating||250 cohort||GIC sector||Rating action|
|Frontier Communications Corp.||CCC||CCC-||501 to 750||Diversified telecommunication services||Downgrade within 'CCC' category|
|Dayton Power & Light Co.||BBB-||BB||751 to 1000||Electric utilities||Downgrade to 'B' or higher|
|The Goodyear Tire & Rubber Co.||BB||BB-||1251 to 1500||Auto components||Downgrade to 'B' or higher|
|McDermott International Inc.||CCC||SD||top 250||Energy equipment and services||Downgrade to nonperforming|
|Michaels Stores Inc.||BB-||B+||top 250||Specialty retail||Downgrade to 'B' or higher|
|RentPath, LLC||CCC+||CCC-||501 to 750||Media||Downgrade within 'CCC' cateogry|
|Plantronics, Inc.||BB||BB-||251 to 500||Communications equipment||Downgrade to 'B' or higher|
|24 Hour Fitness Worldwide Inc.||B||B-||251 to 500||Hotels, restaurants and leisure||Downgrade to 'B-'|
|Accuride Corp.||B-||CCC+||1001 to 1250||Auto components||Downgrade to 'CCC' cateogory|
|Peabody Energy Corp.||BB-||B+||751 to 1000||Oil, gas and consumable fuels||Downgrade to 'B' or higher|
|Dayco Products LLC||B||B-||501 to 750||Auto components||Downgrade to 'B-'|
|TNS Inc.||B+||B||251 to 500||It services||Downgrade to 'B' or higher|
|Libbey Glass Inc.||B||B-||751 to 1000||Household durables||Downgrade to 'B-'|
|NortonLifeLock Inc.||BB+||BB||1251 to 1500||Software||Downgrade to 'B' or higher|
|Beasley Mezzanine Holdings LLC||B+||B||1001 to 1250||Media||Downgrade to 'B' or higher|
|SIRVA Worldwide Inc.||B||B-||751 to 1000||Road and rail||Downgrade to 'B-'|
|Acosta Inc.||CCC||D||501 to 750||Media||Downgrade to nonperforming|
|Cooper-Standard Automotive Inc.||BB-||B+||1001 to 1250||Auto components||Downgrade to 'B' or higher|
|Murray Energy Corp.||CCC||D||top 250||Oil, gas and consumable fuels||Downgrade to nonperforming|
|Envision Healthcare Corp.||B+||B||top 250||Healthcare providers and services||Downgrade to 'B' or higher|
|Realogy Group LLC||BB-||B+||top 250||Real estate management and development||Downgrade to 'B' or higher|
|Commercial Barge Line Co.||CCC+||CCC||1001 to 1250||Marine||Downgrade within 'CCC' cateogry|
|Trinseo Materials Operating S.C.A.||BB-||B+||501 to 750||Chemicals||Downgrade to 'B' or higher|
|Twin River Worldwide Holdings Inc.||BB-||B+||751 to 1000||Hotels, restaurants and leisure||Downgrade to 'B' or higher|
|Twin River Management Group Inc.||BB-||B+||751 to 1000||Hotels, restaurants and leisure||Downgrade to 'B' or higher|
|Town Sports International LLC||B-||CCC||1251 to 1500||Hotels, restaurants and leisure||Downgrade to 'CCC' cateogory|
|FTS International Inc.||B||CCC+||1001 to 1250||Energy equipment and services||Downgrade to 'CCC' cateogory|
|UTEX Industries Inc.||CCC+||CCC||1001 to 1250||Chemicals||Downgrade within 'CCC' cateogry|
|California Pizza Kitchen, Inc.||CCC+||CCC-||1001 to 1250||Hotels, restaurants and leisure||Downgrade within 'CCC' cateogry|
|At Home Holding III Inc.||B+||B||751 to 1000||Specialty retail||Downgrade to 'B' or higher|
|Neustar, Inc.||B||B-||top 250||It services||Downgrade to 'B-'|
|Ascena Retail Group Inc.||CCC+||CCC||top 250||Specialty retail||Downgrade within 'CCC' cateogry|
|Party City Holdings Inc.||B+||B||501 to 750||Specialty retail||Downgrade to 'B' or higher|
|Serta Simmons Bedding LLC||CCC+||CCC||top 250||Household durables||Downgrade within 'CCC' cateogry|
|Southern Graphics Inc.||B-||CCC+||501 to 750||Commercial services and supplies||Downgrade to 'CCC' cateogory|
|Emerald Expositions Holding Inc.||BB-||B+||251 to 500||Media||Downgrade to 'B' or higher|
|USIC Holdings Inc||B||B-||501 to 750||Construction and engineering||Downgrade to 'B-'|
|North American Lifting Holdings Inc.||CCC+||CCC-||1001 to 1250||Construction and engineering||Downgrade within 'CCC' cateogry|
|Shape Technologies Group Inc.||B||B-||501 to 750||Machinery||Downgrade to 'B-'|
|Seadrill Operating LP||CCC+||CCC||501 to 750||Energy equipment and services||Downgrade within 'CCC' cateogry|
|PGX Holdings Inc.||CCC+||CCC||751 to 1000||Professional services||Downgrade within 'CCC' cateogry|
|4L Technologies Inc.||CCC||D||751 to 1000||Communications equipment||Downgrade to nonperforming|
|Boxer Parent Company Inc.||B||B-||top 250||Software||Downgrade to 'B-'|
|Indra Holdings Corp.||CCC||D||1251 to 1500||Textiles, apparel and luxury goods||Downgrade to nonperforming|
|Arvos BidCo S.a.r.l.||B||B-||1251 to 1500||Machinery||Downgrade to 'B-'|
|Constellis Holdings, LLC||B-||CC||251 to 500||Commercial services and supplies||Downgrade to nonperforming|
|CDRH Parent, Inc.||CCC+||CCC-||751 to 1000||Healthcare providers and services||Downgrade within 'CCC' cateogry|
|Outerstuff LLC||CCC+||CCC||1001 to 1250||Textiles, apparel and luxury goods||Downgrade within 'CCC' cateogry|
|GK Holdings Inc.||CCC||CCC-||1251 to 1500||Professional services||Downgrade within 'CCC' cateogry|
|WASH Multifamily Acquisition Inc.||B||B-||501 to 750||Diversified consumer services||Downgrade to 'B-'|
|Jill Acquisition LLC||B-||CCC+||751 to 1000||Specialty retail||Downgrade to 'CCC' cateogory|
|Chemours Company Co. (The)||BB||BB-||501 to 750||Chemicals||Downgrade to 'B' or higher|
|Daseke Inc||B+||B||501 to 750||Road and rail||Downgrade to 'B' or higher|
|SHO Holding I Corporation||CCC+||CCC||1251 to 1500||Textiles, apparel and luxury goods||Downgrade within 'CCC' cateogry|
|Rackspace Hosting, Inc.||B+||B||top 250||It services||Downgrade to 'B' or higher|
|Team Health Holdings, Inc.||B||B-||top 250||Healthcare providers and services||Downgrade to 'B-'|
|Quorum Health Corporation||CCC||CCC-||751 to 1000||Healthcare providers and services||Downgrade within 'CCC' cateogry|
|Mills Fleet Farm Group LLC||B-||CCC||1251 to 1500||Specialty retail||Downgrade to 'CCC' cateogory|
|The Imagine Group LLC||CCC+||CCC-||1251 to 1500||Media||Downgrade within 'CCC' cateogry|
|Alorica Inc.||B||CCC-||751 to 1000||Commercial services and supplies||Downgrade to 'CCC' cateogory|
|Gulf Finance, LLC||B-||CCC+||501 to 750||Energy equipment and services||Downgrade to 'CCC' cateogory|
|Foresight Energy LLC||CCC+||SD||top 250||Oil, gas and consumable fuels||Downgrade to nonperforming|
|SAI Global Holdings I (Australia) Pty Ltd||CCC+||CCC||751 to 1000||Capital markets||Downgrade within 'CCC' cateogry|
|ProAmpac PG Borrower LLC||B||B-||top 250||Trading companies and distributors||Downgrade to 'B-'|
|Casa Systems Inc.||B||B-||1001 to 1250||Communications equipment||Downgrade to 'B-'|
|Limetree Bay Terminals, Llc||BB-||B+||751 to 1000||Project finance: oil and gas||Downgrade to 'B' or higher|
|Casablanca US Holdings Inc||B||B-||751 to 1000||Hotels, restaurants and leisure||Downgrade to 'B-'|
|Contura Energy, Inc.||B||B-||1001 to 1250||Oil, gas and consumable fuels||Downgrade to 'B-'|
|Navico, Inc.USA||CCC+||CCC||1001 to 1250||Communications equipment||Downgrade within 'CCC' cateogry|
|KNB Holdings Corp.||B-||CCC+||1001 to 1250||Household durables||Downgrade to 'CCC' cateogory|
|Exela Intermediate Co. LLC||CCC+||CCC-||501 to 750||It services||Downgrade within 'CCC' cateogry|
|AAC Holdings Inc.||CCC||SD||1251 to 1500||Healthcare providers and services||Downgrade to nonperforming|
|Robertshaw US Holding Corp.||B||B-||501 to 750||Electronic equipment, instruments and components||Downgrade to 'B-'|
|Logix Holding Company, LLC||B||B-||1251 to 1500||Diversified telecommunication services||Downgrade to 'B-'|
|Learfield Communications, LLC||B||B-||251 to 500||Media||Downgrade to 'B-'|
|CIRCOR International Inc.||B+||B||251 to 500||Machinery||Downgrade to 'B' or higher|
|Lakeland Tours, LLC||B||B-||501 to 750||Hotels, restaurants and leisure||Downgrade to 'B-'|
|VAC Germany Holdings GmbH||B||B-||1001 to 1250||Electrical equipment||Downgrade to 'B-'|
|McDermott Technology (Americas) Inc.||CCC||SD||top 250||Energy equipment and services||Downgrade to nonperforming|
|Isagenix International, LLC||B-||CCC+||1001 to 1250||Personal products||Downgrade to 'CCC' cateogory|
|Speedcast International Limited||B||B-||501 to 750||Diversified telecommunication services||Downgrade to 'B-'|
|Rodan & Fields, LLC||B||CCC+||501 to 750||Personal products||Downgrade to 'CCC' cateogory|
|BW NHHC HoldCo Inc.||B-||CCC||751 to 1000||Healthcare providers and services||Downgrade to 'CCC' cateogory|
|Viant Medical Holdings Inc.||B||B-||501 to 750||Chemicals||Downgrade to 'B-'|
|Cohu, Inc.||BB-||B||751 to 1000||Semiconductors and semiconductor equipment||Downgrade to 'B' or higher|
|Triton Solar US Acquisition Co||B||B-||1001 to 1250||Technology hardware, storage and peripherals||Downgrade to 'B-'|
|8th Avenue Food & Provisions, Inc.||B||B-||501 to 750||Food products||Downgrade to 'B-'|
|JP Intermediate B LLC||B||B-||1251 to 1500||Personal products||Downgrade to 'B-'|
|United Natural Foods, Inc.||B+||B||top 250||Food and staples retailing||Downgrade to 'B' or higher|
|Resideo Funding Inc.||BB+||BB||1001 to 1250||Building products||Downgrade to 'B' or higher|
|Plaskolite PPC Intermediate II LLC||B||B-||251 to 500||Chemicals||Downgrade to 'B-'|
|Innovative Water Care Global Corp.||B||B-||1251 to 1500||Chemicals||Downgrade to 'B-'|
|myNEXUS Management, Inc||B+||B||1251 to 1500||Health care technology||Downgrade to 'B' or higher|
|BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. GIC--Global industry classification.|
|Issuers With Loans Held In U.S. BSL CLOs That Ended Fourth Quarter With A Higher Rating|
|Issuer||Third-quarter 2019 rating||Fourth-quarter 2019 rating||250 cohort||GIC sector|
|Bausch Health Companies Inc.||B||B+||Top 250||Pharmaceuticals|
|Micron Technology Inc.||BB+||BBB-||1251 to 1500||Semiconductors and semiconductor equipment|
|Ducommun Inc.||B+||BB-||751 to 1000||Aerospace and defense|
|iStar Inc.||BB-||BB||251 to 500||Equity real estate investment trusts (REITs)|
|Everi Payments Inc.||B||B+||251 to 500||Hotels, restaurants, and leisure|
|Blackboard Inc.||CCC+||B-||1251 to 1500||Software|
|Generac Power Systems Inc.||BB-||BB||751 to 1000||Electrical equipment|
|JBS USA Lux S.A.||BB-||BB||Top 250||Food products|
|syncreon Global Finance (US) Inc||CC||CCC+||751 to 1000||Air freight and logistics|
|Star West Generation LLC||B+||BB-||1251 to 1500||Project finance: Power|
|AerCap Holdings N.V.||BBB-||BBB||Top 250||Trading companies and distributors|
|Fly Funding II S.a.r.l||BB-||BB||501 to 750||Trading companies and distributors|
|CT Technologies Intermediate Holdings Inc.||CCC||CCC+||501 to 750||Health care technology|
|syncreon Group B.V.||CC||CCC+||751 to 1000||Air freight and logistics|
|One Call Corp.||CCC||B-||501 to 750||Consumer finance|
|Delos Finance S.a r.l.||BBB-||BBB||Top 250||Trading companies and distributors|
|Regit Eins GmbH||B||BB-||501 to 750||Software|
|GOBP Holdings Inc.||B||B+||501 to 750||Food and staples retailing|
|IPC Corp.||CC||CCC+||751 to 1000||Software|
|Integro Parent Inc.||B-||B||1251 to 1500||Insurance|
|APLP Holdings Limited Partnership||B+||BB-||501 to 750||Independent Power and Renewable Electricity Producers|
|American Teleconferencing Services Ltd.||SD||CCC+||1251 to 1500||Diversified Telecommunication Services|
|SolarWinds Holdings Inc.||B||B+||Top 250||Technology Hardware, Storage and Peripherals|
|Versum Materials, Inc.||BB+||A||1001 to 1250||Semiconductors and semiconductor equipment|
|Medical Depot Holdings Inc.||CC||CCC+||1251 to 1500||Healthcare equipment and supplies|
|LifeMiles LTD||B-||B+||751 to 1000||Commercial services and supplies|
|Ping Identity Corporation||B-||B+||1001 to 1250||Software|
|IRB Holding Corp.||B||B+||Top 250||Hotels, restaurants, and leisure|
|KBR Inc.||B+||BB-||Top 250||IT services|
|BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. GIC--Global industry classification.|
|CLO Manager Exposure To Loans From Issuers That Experienced A Rating Change In Fourth-Quarter 2019|
|Manager at close of deal||No. of S&P-rated deals in sample||Upgrades (%)||Downgrades (%)||Downgrade to 'B-' (%)||Downgrade into 'CCC' category (%)||Downgrade into nonperforming (%)||Top 250 (%)|
|Aegon USA Investment Management||8||2.18||4.73||2.00||0.24||0.37||47.01|
|AIG Asset Management||2||2.19||4.45||2.35||0.09||0.33||54.46|
|American Money Management||6||1.68||6.75||2.02||0.43||0.58||37.00|
|Anchorage Capital Group||7||2.49||5.07||2.91||0.59||0.00||38.06|
|Angelo, Gordon & Company||1||1.96||3.18||0.37||0.00||0.93||38.02|
|Apollo Credit Management||6||3.44||3.70||2.06||0.34||0.09||62.14|
|Arrowpoint Asset Management||2||1.61||6.43||1.22||0.73||1.40||22.17|
|Bain Capital Credit||7||2.73||5.80||2.78||0.00||0.98||43.72|
|Benefit Street Partners||10||1.96||4.92||1.16||0.26||0.88||49.58|
|Black Diamond Capital Management||3||0.15||5.91||2.06||0.52||0.71||29.81|
|BlackRock Financial Management||1||2.17||3.05||1.57||0.00||0.26||61.61|
|BlueMountain Capital Management||19||2.39||6.17||2.17||0.26||1.05||53.68|
|Brigade Capital Management||1||1.92||4.37||1.94||0.00||0.00||52.02|
|Canyon Capital Advisors||1||2.81||5.77||1.04||0.00||0.00||50.14|
|Carlyle Investment Management||17||1.83||5.98||1.42||0.40||1.23||52.88|
|Chicago Fundamental Investment Partners||4||0.87||5.51||1.95||0.00||0.00||59.54|
|CIFC Asset Management||8||1.92||3.26||1.61||0.36||0.09||53.82|
|Columbia Management Investment Advisers||5||1.20||6.43||1.90||0.00||0.68||50.72|
|Credit Suisse Asset Management||22||2.28||3.54||1.41||0.57||0.00||48.64|
|Credit Value Partners||2||0.85||6.57||1.43||0.59||0.86||43.45|
|Crescent Capital Group||6||0.67||8.26||1.95||0.48||0.81||52.90|
|CVC Credit Partners||9||2.00||4.00||1.57||0.00||0.00||51.34|
|Eaton Vance Management||1||2.13||5.41||2.07||0.11||0.48||54.58|
|Feingold O'Keeffe Capital||1||0.37||6.00||1.11||0.79||1.31||50.97|
|Five Arrows Managers||1||0.43||8.01||3.05||0.00||0.00||37.90|
|Fortress Investment Group||4||0.84||5.12||1.54||1.10||0.63||38.11|
|GC Investment Management||2||3.03||4.59||0.48||1.30||0.00||31.49|
|GoldenTree Asset Management||6||3.10||7.78||2.77||0.00||0.40||55.50|
|Greywolf Capital Management||6||1.71||4.91||1.63||0.00||0.00||73.16|
|GSO/Blackstone Debt Funds Management||17||1.24||4.76||2.12||0.44||0.00||55.03|
|H.I.G. WhiteHorse Capital||1||2.39||8.93||2.28||0.66||0.00||43.69|
|Halcyon Loan Management||2||1.70||5.78||1.22||0.15||0.53||51.55|
|Highbridge Principal Strategies||12||2.49||6.59||2.42||0.00||2.01||56.35|
|Kingsland Capital Management||1||0.86||5.16||1.66||1.27||0.00||36.99|
|KKR Financial Advisors||1||1.09||9.03||2.49||1.43||1.22||44.03|
|Kramer Van Kirk Credit Strategies||1||0.51||5.33||0.69||1.08||0.00||59.96|
|LCM Asset Management||13||1.24||5.43||0.80||0.36||0.00||48.63|
|Marathon Asset Management||3||2.02||9.01||1.34||0.00||2.51||35.31|
|Mariner Investment Group||7||2.37||4.57||1.88||0.00||0.48||58.47|
|MidOcean Credit Fund Management||4||1.42||4.04||1.29||0.17||0.76||44.59|
|MJX Asset Management||2||1.07||7.44||1.94||1.02||1.12||35.47|
|Napier Park Global Capital||1||1.72||4.48||1.43||0.50||0.45||42.58|
|NCC CLO Manager||1||0.32||10.51||2.44||1.53||1.03||38.76|
|Newfleet Asset Management||1||2.66||6.43||2.14||0.97||0.56||62.17|
|Oak Hill Advisors||11||2.57||2.97||1.27||0.00||0.82||56.31|
|Oaktree Capital Management||5||1.45||5.24||1.95||0.33||1.13||48.57|
|Och-Ziff Loan Management||4||2.11||5.00||1.65||0.54||0.00||51.33|
|Octagon Credit Investors||20||2.14||5.46||2.33||0.29||0.99||59.85|
|Onex Credit Partners||9||1.30||4.80||1.09||0.00||0.80||64.77|
|Orchard First Source Asset Management||2||1.28||6.04||0.12||0.00||0.67||38.82|
|Palmer Square Capital Management||6||1.78||3.94||1.40||0.59||0.37||59.51|
|Par-Four Investment Management||3||0.70||9.84||2.22||0.83||0.80||52.14|
|Park Avenue Institutional Advisers||4||0.59||4.58||1.73||0.85||0.00||46.55|
|Pretium Credit Management LLC||2||1.15||5.04||1.42||0.53||0.92||45.97|
|Prudential Investment Management||12||1.93||6.63||2.64||0.31||0.23||53.39|
|Redding Ridge Asset Management||6||2.61||4.28||1.64||0.37||0.14||63.57|
|Romark CLO Advisors||1||1.31||5.00||1.45||0.33||0.70||56.53|
|Seix Investment Advisors||1||2.76||5.10||0.85||0.15||0.87||52.36|
|Sound Point Capital Management||1||1.12||6.76||2.38||0.82||1.37||43.27|
|Symphony Asset Management||2||1.49||6.05||2.76||0.00||0.19||70.18|
|TCW Asset Management||3||1.68||3.46||2.55||0.00||0.00||44.58|
|Telos Asset Management||2||0.25||12.44||0.38||3.85||0.90||18.50|
|THL Credit Senior Loan Strategies||8||1.67||6.73||1.40||0.05||0.34||49.31|
|Trinitas Capital Management||2||0.89||7.29||1.21||0.34||0.36||56.91|
|Voya Investment Management||17||2.29||4.56||2.13||0.23||0.46||56.03|
|West Gate Horizons Advisors||1||0.67||10.38||3.34||0.00||1.12||40.07|
|Z Capital CLO Management||1||2.49||10.34||0.93||1.63||2.82||39.84|
In tables 2 and 3, we focused on the third-quarter 2019 portfolio exposures across 421 reinvesting S&P-rated U.S. BSL CLOs in this survey. In table 4, we list overall exposure to the issuers listed in tables 2 and 3, per manager across the S&P-rated CLOs that they manage (we aggregate the CLO portfolios from managers together to calculate their exposures in table 4). We created these tables based only on S&P-rated portfolios per manager (we include the count CLOs used to calculate the exposures in table 4). At a high level, we expect managers to generally have a high degree of overlap between their deals, even for the deals we don't rate.
Managers may have sold off their downgraded exposures before or after the downgrade (on average, there was a slight decline in exposure to these downgraded names by the end of the fourth-quarter 2019 as well as some par loss, suggesting there may have been some sales of these loans at lower prices), while some managers may have increased exposure to these issuers due to attractive price levels or debtor-in-possession-like investments; however, on average, the managers maintained similar exposures to the issuers in tables 2 and 3 at the beginning and end of fourth-quarter 2019.
- Leveraged Finance & CLOs Uncovered: https://www.spglobal.com/ratings/en/research-insights/topics/leveraged-finance-clos-uncovered
- It's Another Brick In The Debt Wall For U.S. Oil And Gas Companies, Jan. 28, 2020
- U.S. Leveraged Finance Q4 2019 Update: It's All About The Newbies, The New 'B's, Jan. 27, 2020
- As The 'B-' Universe Expands, Timing Is Everything, Dec. 6, 2019
- CLO Spotlight: To 'B-' Or Not To 'B-'? A CLO Scenario Analysis In Three Acts, Nov. 26, 2019
This report does not constitute a rating action.
|Primary Credit Analysts:||Daniel Hu, FRM, New York (1) 212-438-2206;|
|Robert E Schulz, CFA, New York (1) 212-438-7808;|
|Ramki Muthukrishnan, New York (1) 212-438-1384;|
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