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Quote Book: Gleaning Sector Trends For BSL CLO Market Participants

U.S. broadly syndicated collateralized loan obligations (CLOs) are backed primarily by broadly syndicated loans (BSLs) issued by U.S. companies. The CLO group within S&P Global Ratings' U.S. Structured Finance department believes that a review of the recent rating action reports published by U.S. Corporate Ratings can provide insights on developing sector trends. Accordingly, we have compiled a list of key quotes/paraphrases from recently published Corporate Ratings reports on issuers with loans held in BSL CLOs (see table 1). We note that the quotes highlighted below are company specific and, therefore, may not apply to every issuer within a given sector. Nonetheless, it is our view that this at-a-glance snapshot view of the landscape will add value to CLO market participants.

Table 1

Key Quotes
From rating reports on corporate issuers with loans held in BSL CLOs
Issuer GIC sector Quotes from rating actions this past week
WestJet Airlines Ltd. Airlines "We do not foresee a recovery in air travel demand to pre-pandemic levels until 2024, due, in part, to current international travel restrictions and a resurgence of COVID-19 cases, particularly in the U.S."
Specialty Building Products Holdings LLC Building Products "Over the last few quarters, we have seen strong demand trends… new construction and repair, and remodeling." "Increased demand for suburban living and low mortgage rates have sparked a surge in homebuilding activity."
GCI LLC Diversified telecommunication services "Strong consumer broadband demand… remote learning and work-from-home conditions should contribute to customers taking faster data speeds… as more people migrate to over-the-top video platform."
Penn National Gaming Inc. Hotels, restaurants, and leisure "The company has reopened the majority of its casinos… We believe regional gaming markets will recover faster than destination markets, such as the Las Vegas Strip, because most customers drive to these properties rather than fly."
Epic Crude Services L.P. Oil, gas, and consumable fuels "Lower volume flows as a result of reduced drilling activity in the Permian basin…" "…exposed to volumetric fluctuations, as approximately 40% (225,000 bbl/day) of Permian capacity is backstopped by minimum volume commitments…"
SuperMoose Newco Inc. Software "Revenue has seen a sharp decline due to the impact of COVID-19 on license bookings from new customers." "Government customers remain willing to pay for existing services, but are not looking to add new ones…" "A decline in tax revenue from COVID-19 could hurt government budgets."
Calceus Acquisition Inc. Textiles, apparel, and luxury goods "We expect sequential sales growth to return in the latter half of fiscal 2021...we believe the retail environment will be highly promotional, with the company working to clear-through its dress inventory; the shift to more casual footwear having been accelerated by the higher adoption of remote work."
The Pasha Group Air freight and logistics "...lower demand for cargo between the U.S. mainland and Hawaii. Demand for auto processing and shipments also decreased due to COVID-19..." "The relocation business was impaired by the government's 90-day stop order issued in March...we expect revenue to recover in the second half of 2020, as cargo and auto volumes rebound and some administrative orders expire."
UFC Holdings LLC Entertainment "While UFC's revenue and EBITDA declined in the second quarter due to the postponement of live events amid the COVID-19 pandemic, the impact was mitigated by a transition to events without live audiences." "We believe the company will host approximately the same number of events in 2020 as in 2019."
CHG PPC Parent LLC Food products "...stronger-than-expected recovery in the foodservice business." "U.S. Census Bureau data showed sequential monthly improvement in food services & drinking places revenues." "Retail sales may moderate in the back half of the year due to some initial pantry-loading sales surges."
KAR Auction Services Inc. Commercial services and supplies "Used car demand has exceeded our previous expectations, with used car prices reaching record levels." "There remain uncertainties regarding the sustainability of the volume pickup."
Gol Linhas Aereas Inteligentes S.A. Airlines "We now expect global air traffic to fall by as much as 60%-70% in 2020 versus 2019, and 2021 air passenger traffic to decline 30%-40% compared with the 2019 base." "The company has shown considerable flexibility in its costs and operations, efficiently matching capacity to demand, and has reached favorable agreements with aircraft lessors, suppliers, and labor unions."
BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. GIC--Global industry classification.

We are also including a table listing all rating actions on issuers with loans held in U.S. BSL CLOs that have taken place over the past two weeks. For each issuer, we include the 250 cohort rank, to give an indication of how widely held the issuer's loans are across U.S. BSL CLOs rated by S&P Global Ratings. U.S. BSL CLOs, collectively, have had exposure to over 1,500 parent issuers operating across several different global industry classification (GIC) sectors. For the past several quarters, the top 250 parent issuers have made up just over half of the assets under management within S&P Global Ratings-rated U.S. BSL CLOs, while the remaining 1,250+ issuers make up the other half of the exposure. We categorize each of the issuers into cohorts of 250. (For the list of top 250 issuers as of second-quarter 2020, see "The Most Widely Referenced Corporate Obligors In Rated U.S. BSL CLOs: Second-Quarter 2020," published July 9, 2020.)

Table 2

Rating Actions Over Past Two Weeks
On corporate issuers with loans held in BSL CLOs
Action Date Issuer GIC Sector Rating to Rating from Action PR Links Rank within U.S. BSL CLOs
September 14, 2020 APC Automotive Technologies Intermediate Holdings LLC Auto components NR D Withdrawal Link 1,001 to 1,250
September 14, 2020 Specialty Building Products Holdings LLC Building products B-/Positive B-/Negative Affirmed Link 501 to 750
September 14, 2020 GCI LLC Diversified telecommunication services B-/Watch Pos B-/Negative Placed on Watch Pos Link 1,251 to 1,500
September 15, 2020 Town Sports International LLC Hotels, restaurants, and leisure CC/Negative SD Upgrade Link 1,001 to 1,250
September 15, 2020 Penn National Gaming Inc. Hotels, restaurants, and leisure B/Negative B/Watch Neg Affirmed; off Watch Neg Link top 250
September 15, 2020 Calceus Acquisition Inc. Textiles, apparel, and luxury goods B/Negative B/Watch Neg Affirmed; off Watch Neg Link 1,001 to 1,250
September 16, 2020 Adtalem Global Education Inc. Diversified consumer services BB/Watch Neg BB/Stable Placed on Watch Neg Link 751 to 1,000
September 16, 2020 Camelot UK Holdco Limited Interactive media and services B/Positive B/Watch Pos Affirmed; off Watch Pos Link 251 to 500
September 17, 2020 WestJet Airlines Ltd. Airlines B-/Negative B-/Watch Neg Affirmed; off Watch Neg Link top 250
September 17, 2020 GBT JerseyCo Ltd. Hotels, restaurants, and leisure B/Negative B+/Negative Downgrade Link 251 to 500
September 17, 2020 Epic Crude Services L.P. Oil, gas, and consumable fuels B-/Negative B/Negative Downgrade Link 1,001 to 1,250
September 17, 2020 SuperMoose Newco Inc. Software CCC/Negative CCC+/Negative Downgrade Link 251 to 500
September 18, 2020 Hanjin International Corp. Real estate management and development CCC+/Negative CCC+/Watch Neg Affirmed; off Watch Neg Link 501 to 750
September 21, 2020 PGS ASA Energy equipment and services SD CCC/Negative Downgrade Link 751 to 1,000
September 21, 2020 Frontera Generation Holdings LLC Electric utilities CCC/Negative BB-/Stable Downgrade; outlook to negative Link 751 to 1,000
September 23, 2020 FTS International Inc. Energy equipment and services D CC/Negative Downgrade Link 1,001 to 1,250
September 23, 2020 Technicolor S.A. Entertainment SD CC/Watch Neg Downgrade Link 751 to 1,000
September 23, 2020 The Pasha Group Air freight and logistics B-/Negative B/Stable Downgrade; outlook to negative Link 1251 to 1,500
September 23, 2020 Travelport Finance (Luxembourg) S.A.R.L IT services CC/Watch Neg CCC/Negative Downgrade; on Watch Neg Link top 250
September 23, 2020 UFC Holdings LLC Entertainment B/Stable B/Watch Neg Affirmed; off Watch Neg Link top 250
September 24, 2020 Boardriders Inc. Textiles, apparel, and luxury goods CCC/Negative SD Upgrade Link 1,001 to 1,250
September 24, 2020 CHG PPC Parent LLC Food products B/Stable B-/Negative Downgrade Link 501 to 750
September 24, 2020 Garrett Motion Inc. Auto components D B/Watch Neg Downgrade Link 501 to 750
September 24, 2020 KAR Auction Services Inc. Commercial services and supplies B/Negative B/Watch Neg Affirmed; off Watch Neg Link 501 to 750
September 24, 2020 Pioneer UK Midco 1 Limited Life sciences, tools, and services B-/Stable B/Negative Downgrade Link 251 to 500
September 25, 2020 Gol Linhas Aereas Inteligentes S.A. Airlines CCC+/Developing CCC-/Watch Neg Upgrade Link 1,001 to 1,250
BSL--Broadly syndicated loan. CLO--Collateralized loan obligation.

This report does not constitute a rating action.

Primary Credit Analysts:Daniel Hu, FRM, New York (1) 212-438-2206;
daniel.hu@spglobal.com
Robert E Schulz, CFA, New York (1) 212-438-7808;
robert.schulz@spglobal.com
Secondary Contact:Bryan A Ayala, New York + 1 (212) 438 9012;
bryan.ayala@spglobal.com
CLO Sector Lead:Stephen A Anderberg, New York (1) 212-438-8991;
stephen.anderberg@spglobal.com
Analytical Manager, Leveraged Finance:Ramki Muthukrishnan, New York (1) 212-438-1384;
ramki.muthukrishnan@spglobal.com

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