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SF Credit Brief: Review Of 2020 U.S. CLO Insights Index Published

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CLO Insights 2020 Index: Full-Year Review

At the start of 2020, S&P Global Ratings created its U.S. CLO Insights Index, an index of 410 reinvesting U.S. broadly syndicated loan collateralized loan obligations (BSL CLOs) that covered a wide range of CLO portfolios from different vintages and many different managers. The index is comprised of transactions that had already gone effective and started issuing trustee reports as of the start of 2020 and would reinvest through the entire year. Due to optional redemptions, upsize resets, special redemptions, and other data reasons, we removed six deals from the index during the year (see the count of CLOs per manager in table 2 below).

All of the credit-related metrics we track for the CLOs in our index (see table 1 below) ended the year in worse shape than they started, which is not surprising given the economic impact of the COVID-19 pandemic and the related shutdowns. However, the news wasn't all bad. Most of the metrics we calculated as part of the index experienced an inflection at some point in 2020, deteriorating significantly in the spring but then seeing gradual improvement after hitting bottom at some point later in the spring or during the summer months. For example, the average exposure to loans from companies rated in the 'CCC' category increased to a peak of at about 12% in May from about 4% in March, before gradually decreasing to 8.7% by the end of 2020. The only metric in table 1 that did not see a turnaround during the year was the average 2020-to-date par change, which saw the average CLO lose about 1% of par during the course of the year.

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 (%) Watch negative (%) Negative outlook (%) Negative outlook or Watch 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
Oct. 6, 2020 24.84 9.35 1.35 1.76 94.12 2883 (0.69) 2.44 38.60 41.04
Nov. 2, 2020 24.52 9.03 1.35 1.90 94.13 2865 (0.78) 2.28 37.52 39.80
Dec. 6, 2020 24.79 8.86 1.28 2.04 96.26 2854 (0.87) 1.86 35.01 36.88
Dec. 31, 2020 25.0 8.73 1.0 2.1 97.0 2839 (0.99) 1.8 34.0 35.8
Note: CLO Insights 2020 Index is an index of 410 S&P Global Ratings rated U.S. BSL CLOs that will be reinvesting for all of 2020. O/C--Overcollateralization. SPWARF--S&P Global Ratings' weighted average rating factor. CLO--Collateralized loan obligation.

How CLOs Within The CLO Insights 2020 Index Coped With COVID-19

After analyzing the portfolios within this index, we see that CLO managers were actively trading during the year, with the average CLO portfolio seeing about 37% of its assets turner over in all of 2020. To get a sense of the impact of this trading on portfolios, we reviewed the changes across various parameters during the year (see "CLO Spotlight: U.S. CLO Insights Index 2020 Review: Coping With COVID-19," published Jan. 14, 2021). We found that, by the end of 2020, CLO portfolios with certain credit profiles at the beginning of the year were able to withstand the downturn better than others, as evidenced by changes in their credit metrics during the year. Certain parameters, such as a higher weighted average loan price and lower exposure to nonperforming assets before the downturn, are correlated with better performance during the downturn.

We'll soon create and start publishing updates on our CLO Insights 2021 Index (which we can't do until all of the CLOs to be included in the index start issuing regular trustee reports). In the meantime, table 2 shows a breakdown of the collateral managers for the CLOs within our 2020 Index, bucketed by the number of deals from each manager.

Table 2

Count Of Deals Per Manager Within CLO Insights 2020 Index
10 or greater Five to nine Two to four One
CSAM CIFC CFIP Allstate
Octagon Onex MidOcean Angelo Gordon
BlueMountain Aegon PineBridge Brigade
Carlyle CVC Arrowpoint Canyon
GSO/Blackstone THL Black Diamond Eaton Vance
Voya Anchorage Columbia Five Arrows
Ares Barings Marathon Golub
Neuberger GoldenTree Par-Four Goldman Sachs
Highbridge Mariner TCW Gugeenheim
Prudential AMMC Teachers WhiteHorse
Apollo Oaktree AIG Kingsland
LCM Palmer Square Alcentra Napier Park
Oak Hill Carlson BlackRock NCC
Bain Crescent CVP NewStar
Benefit Street Fortress Halcyon Romark
Greywolf KKR Seix
OZLM MJX Sound Point
Park Avenue OFSI Steele Creek
Symphony Telos
TPG Trinitas
Trimaran West Gate
Whitebox
ZAIS
CLO--Collateralized loan obligation.

Related Research

This report does not constitute a rating action.

Primary Credit Analysts:Daniel Hu, FRM, New York + 1 (212) 438 2206;
daniel.hu@spglobal.com
Stephen A Anderberg, New York + (212) 438-8991;
stephen.anderberg@spglobal.com
Secondary Contact:Deegant R Pandya, New York + 1 (212) 438 1289;
deegant.pandya@spglobal.com

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