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In This List

SF Credit Brief: More Than 10% Of U.S. CLO Ratings Lowered In Q3; Stabilized O/C Ratios Expected To Slowly Improve Heading Into October


U.S. RMBS--After The Credit Risk Transfer Forbearance Plateau


SF Credit Brief: U.S. Auto ABS Experienced A Dramatic Reduction In Loans In Extension Status In August, But Delinquencies Continued To Rise


COVID-19 Activity In Global Structured Finance As Of Oct. 16, 2020


Bulletin: U.K. Pub Corporate Securitizations Ratings Remain On CreditWatch With Continued Uncertainty As Winter Approaches

SF Credit Brief: More Than 10% Of U.S. CLO Ratings Lowered In Q3; Stabilized O/C Ratios Expected To Slowly Improve Heading Into October

We are providing an update on the CLO Insights 2020 Index on a more frequent 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.


Dust Settling Around U.S. Corporate Ratings Placed On CreditWatch Negative Due To COVID-19

During the third quarter, the number of U.S. speculative-grade corporate downgrades continued to level off, along with a smattering of upgrades. As we approach the end of the quarter, we resolved many of the COVID-19-related CreditWatch negative placements on our ratings on corporate issuers, sometimes without a downgrade. As of this week, less than 4% of the CLO Insights 2020 Index's (the Index) portfolio exposures are on CreditWatch negative (see table 1 below).

Chart 1


Table 1

CLO Index Metrics (CLO Insights 2020 Index)
As of date 'B-' (%) 'CCC' category (%) Nonperforming category (%) Jr. 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
Aug. 2, 2020 24.35 10.66 1.57 1.48 92.60 2925 (0.55) 5.76 38.69 44.45
Sept. 7, 2020 24.36 10.10 1.39 1.56 94.41 2900 (0.66) 4.57 38.32 42.89
Sept. 13, 2020 24.56 10.11 1.38 1.57 94.64 2899 (0.66) 3.79 38.29 42.08
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.

Average Loan Prices Continue To Increase In Q3, O/C Test Cushions Slower To Mend

Of the 410 reinvesting U.S. broadly syndicated collateralized loan obligations (BSL CLOs) within the Index, 72 have paid down their senior notes by 84 basis points, on average, due to interest diversion from failing overcollateralization (O/C) tests since COVID-19. Meanwhile, the junior O/C cushion improved slightly during the third quarter, up to 1.6% from 1.4% at the start of the quarter, but it is still well off the average cushion of 3.8% at the start of March (e.g., 53 CLOs within the Index continue to fail their junior O/C test). As we approach the end of the quarter and October payment dates, average loan prices of the exposures across the Index have increased to 94.6, just a point shy of the level at the start of March (95.8). O/C cushions in the Index will likely take more time (as will more senior note paydowns) to return to pre-COVID-19 levels due to a combination of par loss and the lower price of weaker credits (i.e., defaults and an excess of 'CCC' rated credits), unless there is par build in the portfolios.

U.S. CLO Rating Actions In Q3

Our COVID-19-related U.S. CLO rating actions to date have affected a total of 351 U.S. CLO transactions and consisted of:

  • 129 affirmations at the current rating level that had previously been on CreditWatch with negative implications (i.e., no downgrades);
  • 473 downgrades;
  • Seven new CLO CreditWatch negative placements and four upgrades during the course of the review process; and
  • Three ratings lowered to 'CC (sf)' from junior notes of amortizing CLO2.0s.

For more information, see "S&P Global Ratings COVID-19 Related Actions On U.S. CLO Ratings," published Sept. 17, 2020.

Table 2

U.S. CLO CreditWatch Resolutions And Non-CreditWatch Downgrades In Third-quarter 2020
Rating category at start of 3Q2020 Affirm 1-notch DG 2-notch DG 3-notch DG 4-notch DG 5-notch DG Total DG to spec-grade rating DG to 'CCC' category DG to 'CC'
'A' 2 8 2 3 1 16
BBB' 15 62 13 5 3 98 53
'BB' 42 148 48 41 13 8 300 16
'B' 66 80 21 9 176 93
'CCC' 4 4 4 12 5 3
Total 129 302 88 58 17 8 602 53 114 3
DG--Downgrade. Spec--Speculative.

Related Research

This report does not constitute a rating action.

Primary Credit Analysts:Daniel Hu, FRM, New York (1) 212-438-2206;
Stephen A Anderberg, New York (1) 212-438-8991;
Robert E Schulz, CFA, New York (1) 212-438-7808;
Secondary Contact:Deegant R Pandya, New York (1) 212-438-1289;

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