We are providing an update on the CLO Insights 2020 Index on a periodic basis to assess the impact of recent negative rating actions on the obligors held in U.S. broadly syndicated (BSL) collateralized loan obligation (CLO) collateral pools.
CLO Insights 2020 Index
|CLO Index Metrics (CLO Insights 2020 Index)|
|As of date||'B-' (%)||'CCC' category (%)||Nonperforming category (%)||Junior O/C cushion (%)||Weighted avg. price of portfolio||SPWARF||Par change (%)||CreditWatch negative (%)||Negative outlook||Negative outlook or CreditWatch negative|
|Jan. 1, 2020||19.97||4.11||0.54||3.86||97.45||2644||0.00||1.63||17.36||19.00|
|Feb. 1, 2020||20.20||4.07||0.56||3.80||97.55||2645||(0.04)||1.33||17.66||18.79|
|March 1, 2020||20.16||4.13||0.63||3.76||95.83||2639||(0.07)||1.61||17.18||18.79|
|April 5, 2020||23.47||10.06||0.81||3.73||83.11||2857||(0.10)||10.71||24.37||35.08|
|May 3, 2020||25.40||12.31||1.61||2.38||86.73||2986||(0.23)||9.82||32.56||42.38|
|June 8, 2020||25.71||11.86||1.35||1.13||91.90||2960||(0.34)||8.42||36.34||44.76|
|July 6, 2020||24.82||11.41||1.53||1.39||91.14||2951||(0.39)||6.42||37.60||44.02|
|July 12, 2020||24.65||11.36||1.53||1.40||91.38||2947||(0.39)||6.13||37.83||43.96|
|July 19, 2020||24.82||11.29||1.54||1.41||91.79||2948||(0.40)||6.01||38.20||44.22|
|July 26, 2020||24.33||11.1||1.66||1.5||92.61||2945||(0.44)||5.73||38.08||43.81|
|Note: The CLO Insights 2020 Index is an index of 410 U.S. BSL CLOs rated by S&P Global Ratings that will be reinvesting for all of 2020. O/C--Overcollateralization. SPWARF--S&P Global Ratings weighted average rating factor.|
As trustee reports are being processed, we see that average junior overcollateralization (O/C) cushions have increased to 1.46% from 1.13% in mid-June 2020, after falling from an average of 3.80% at the start of the year. Within the trustee reports we have processed as of July 26, 2020, less than 140 of the U.S. BSL CLOs rated by S&P Global Ratings are failing one or more of their O/C tests (including amortizing CLOs).
After peaking in late March and early April, negative rating actions on U.S. corporate entities have moderated. Since early March, just under 31.00% of U.S. BSL CLO collateral have been downgraded or placed on CreditWatch.
U.S. CLO Rating Actions
On July 24 and 29, 2020, we downgraded 63 CLO tranches from 40 U.S. BSL CLOs by 1.2 notches on average; 496 tranches across 287 CLO transactions are currently still on CreditWatch with negative implications.
The table below summarizes these U.S. CLO rating actions as of July 29, 2020, highlighting those that pertain to the resolution to the COVID-related CreditWatch placements.
|Result of US CLO Rating Actions On CLOs|
|Rating Category Prior To Action||Three-notch downgrade||Two-notch downgrade||One-notch downgrade||Affirm||Grand total||Speculative grade||'CCC' category|
Please refer to our full article "U.S. CLO Rating Actions And Exposure To Negative Corporate Rating Actions (As Of July 26, 2020)," published July 29, 2020, to download the list of CLO CUSIPs that have been downgraded or are currently on CreditWatch.
- U.S. CLO Rating Actions And Exposure To Negative Corporate Rating Actions (As Of July 26, 2020), July 29, 2020
- The Most Widely Referenced Corporate Obligors In Rated U.S. BSL CLOs: Second-Quarter 2020, July 9, 2020
- Sector Averages Of Reinvesting U.S. BSL CLO Assets: COVID-19-Related Corporate Downgrades Caused Significant Deterioration In First-Quarter 2020, May 18, 2020
- 48 U.S. BSL CLO Ratings Placed On CreditWatch Negative; Total CreditWatch Negative Count Increases To 406, May 1, 2020
- 96 U.S. Reinvesting CLO Ratings Placed On CreditWatch Negative; Total CreditWatch Negative Count Increases To 358, April 27, 2020
- Ratings On 155 Classes From 113 U.S. Reinvesting CLOs Placed On Watch Negative, April 17, 2020
- 48 Ratings On 35 U.S. CLOs With Large Exposure to 'CCC' Rated Assets Placed On CreditWatch Negative, April 3, 2020
- 22 Ratings On 15 U.S. Reinvesting CLOs Exposed To Downgrades And Stressed Sectors Placed On CreditWatch Negative, March 27, 2020
- 25 Ratings On 15 U.S. CLO Transactions With Larger Exposures To Energy-Related Sectors Placed On Watch Negative, March 20, 2020
This report does not constitute a rating action.
|Primary Credit Analyst:||Daniel Hu, FRM, New York (1) 212-438-2206;|
|Secondary Contact:||Deegant R Pandya, New York (1) 212-438-1289;|
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