S&P Global Ratings is publishing performance benchmarks for rated collateralized loan obligation (CLO) transactions. The performance benchmarks provide transparency into our view of CLO collateral credit quality and diversity through the lens of our CLO criteria (see "S&P Global Ratings' Updated Assumptions For CDO Monitor Non-Model Version," published June 21, 2019) and non-model version of our CDO Monitor, which is used by collateral managers to determine compliance with the CDO Monitor Test outlined in their CLO transaction documents. The benchmarks also highlight different CLO manager investment styles--for example, which managers prefer to invest in loans from higher-rated issuers or prefer to maintain more diversified portfolios.
Non-Model Monitor's Benchmarks
Chart 1 summarizes the non-model Monitor's benchmarks.
These metrics are calculated based on portfolio information from the recent trustee reports and our ratings on the corporate obligors in the CLO collateral pools as of the end of first-quarter 2021. The metrics below are calculated for the portfolio exposures to obligors with performing ratings (rated 'CCC-' and above). For example, if a CLO has exposure to an obligor that gets downgraded to a nonperforming rating ('CC', 'SD', or 'D'), the monitor metrics of the portfolio will exclude exposure to said obligor.
Non-Model Monitor Benchmarks
U.S. reinvesting broadly syndicated loan (BSL) and middle-market (MM) CLO comparison
Table 1 shows the average first-quarter 2021 metrics for U.S. reinvesting BSL and MM CLOs.
Table 1
| Average First-Quarter 2021 U.S. CLO Metrics | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SPWARF | DRD | ODM | IDM | RDM | WAL (years) | |||||||||
| BSL CLOs | 2722 | 818 | 202.93 | 23.86 | 1.18 | 4.86 | ||||||||
| MM CLOs | 3934 | 645 | 70.23 | 14.45 | 1.02 | 3.60 | ||||||||
| CLO--Collateralized loan obligation. BSL--Broadly syndicated loan. MM--Middle-market. SPWARF--S&P Global weighted average rating factor. DRD--Default rate dispersion. ODM--Obligor diversity measure. IDM--Industry diversity measure. RDM--Regional diversity measure. WAL--Weighted average life. | ||||||||||||||
Relative to reinvesting BSL CLO portfolios, reinvesting middle-market CLO portfolios have:
- Higher average SPWARF (lower credit rating distribution),
- Shorter average tenor, and
- Lower average obligor diversity measures (ODM) and industry diversity measures (IDM).
U.S. CLO metrics
Table 2 shows the first-quarter 2021 portfolio metrics for the S&P Global Ratings-rated U.S. CLOs (click to download list). We include a CUSIP of one of the tranches within the capital structure to help identify the listed transactions.
Related Research
- S&P Global Ratings' Updated Assumptions For CDO Monitor Non-Model Version, June 21, 2019
- How To Build Your Own CDO Monitor E8 (Non-Model Version), June 21, 2019
Appendix
Appendix
| Rating Factor | |
|---|---|
| Rating | Rating factor |
| AAA | 13.51 |
| AA+ | 26.75 |
| AA | 46.36 |
| AA- | 63.90 |
| A+ | 99.50 |
| A | 146.35 |
| A- | 199.83 |
| BBB+ | 271.01 |
| BBB | 361.17 |
| BBB- | 540.42 |
| BB+ | 784.92 |
| BB | 1233.63 |
| BB- | 1565.44 |
| B+ | 1982.00 |
| B | 2859.50 |
| B- | 3610.11 |
| CCC+ | 4641.40 |
| CCC | 5293.00 |
| CCC- | 5751.10 |
The authors would like to thank Ian Chandler for his data analytics contribution to this update.
This report does not constitute a rating action.
| Primary Credit Analyst: | Daniel Hu, FRM, New York + 1 (212) 438 2206; daniel.hu@spglobal.com |
| CLO Sector Lead: | Stephen A Anderberg, New York + (212) 438-8991; stephen.anderberg@spglobal.com |
| Analytical Manager: | Jimmy N Kobylinski, New York + 1 (212) 438 6314; jimmy.kobylinski@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.