articles Ratings /ratings/en/research/articles/230831-sf-credit-brief-clo-insights-2023-u-s-bsl-index-downgrades-of-widely-held-obligors-bump-up-ccc-baskets-al-12838616 content esgSubNav
In This List

SF Credit Brief: CLO Insights 2023 U.S. BSL Index: Downgrades Of Widely Held Obligors Bump Up ‘CCC’ Baskets; Also, We Compare U.S. And European CLOs


Weekly European CLO Update


Washington Morgan Capital Co. LLC--ABCP Conduit Profile


Banks Switch Gears To Tax-Exempt TOBs As Taxable Rates Hit New Highs


Servicer Evaluation: Midland Loan Services

SF Credit Brief: CLO Insights 2023 U.S. BSL Index: Downgrades Of Widely Held Obligors Bump Up ‘CCC’ Baskets; Also, We Compare U.S. And European CLOs

(Editor's Note: Editor's note: This report is S&P Global Ratings' monthly summary update of U.S. BSL CLO Index's credit metrics and notable credit themes.)


Downgrades across U.S. broadly syndicated loan (BSL) collateralized loan obligation (CLO) obligors picked up slightly in August, outnumbering upgrades for another month. Despite the downgrades, several CLO metrics improved slightly during the month, including S&P Global Ratings' weighted average rating factor (SPWARF) values across the index. These have now improved slightly over the past three months, partially driven by the gradual decline in CLO exposure to assets from 'B-' rated companies.

The average BSL CLO 'CCC' basket ticked up by late August, mainly driven by widely-held Lumen Technologies Inc. and Level 3 Financing Inc, whose ratings were both lowered to 'CCC+' from 'B' on Aug. 17, 2023. As of late August, over one-third of the CLOs in the index (which consists of 533 S&P Global Ratings-rated reinvesting U.S. BSL CLOs) are exceeding their 7.5% threshold for 'CCC' category issuers. Downgrades of corporate ratings into the 'CCC' range may result in overcollateralization (O/C) cushion volatility for some CLOs in the coming months, though the current average junior O/C test cushion, at just over 4% across the entire index, remains healthy by historical standards. The cushion is down from 4.8% one year ago.

Average loan prices in CLO collateral pools (modestly) improved for another month, improving to 95.5 from 95.3 in July, while exposure to loans from issuers with a nonperforming rating declined to 0.6% from 0.7% over the same period. On a less positive note, the proportion of CLO obligors with a rating on negative outlook continues to tick up slightly, and now stands at just over 17% of total collateral. Looking towards future CLO 'CCC' baskets, 5.9% of BSL CLO assets come from an obligor rated 'B-' with a negative outlook, which by definition will end up in the 'CCC' range (or lower) if they see a downgrade.

Table 1

CLO BSL Index metrics (CLO Insights 2022-2023 U.S. BSL Index)
As of date 'B-' (%) 'CCC' category (%) Nonperforming assets (%) SPWARF WARR (%) Watch negative (%) Negative outlook (%) Weighted avg. price of portfolio ($) Jr. O/C cushion (%) % of target par 'B-' on negative outlook (%)
Aug. 31, 2022(i) 29.66 3.57 0.49 2744 59.77 0.95 11.52 94.78 4.80 100.04 1.88
Sept. 30, 2022(i) 29.43 3.75 0.44 2741 59.87 1.02 12.70 92.06 4.76 100.04 2.66
Oct. 31, 2022(i) 29.39 4.44 0.32 2743 59.83 0.52 13.74 92.45 4.77 100.07 3.14
Nov. 30, 2022(i) 30.29 4.45 0.27 2741 59.90 0.32 13.89 93.11 4.76 100.07 3.50
Dec. 31, 2022(i) 30.31 4.88 0.42 2754 59.91 0.12 14.58 92.85 4.76 100.09 3.72
Jan. 31, 2023(i) 30.40 5.08 0.40 2757 60.02 0.16 15.05 94.75 4.66 100.08 3.84
Feb. 28, 2023(i) 30.77 4.73 0.61 2762 59.85 0.22 15.87 94.64 4.58 100.06 4.07
March 31, 2023(i) 30.85 4.92 0.60 2760 59.67 0.31 16.30 93.94 4.48 100.06 4.19
April 30, 2023(i) 31.04 5.36 0.63 2768 59.56 0.32 16.81 94.21 4.41 100.04 5.37
May 31, 2023(i) 29.94 6.25 0.73 2786 59.39 0.52 16.13 93.32 4.26 99.94 4.69
June 30, 2023(i) 29.13 6.81 0.67 2777 59.41 0.47 15.97 94.83 4.11 99.88 4.78
July 31, 2023(ii) 28.65 6.62 0.73 2768 59.28 0.33 16.66 95.33 4.03 99.83 5.43
Aug. 23, 2023(iii) 28.33 6.87 0.60 2757 59.27 0.28 17.04 95.50 4.01 99.82 5.90
(i)Index metrics based on end-of-month ratings and pricing data and as of month portfolio data available. (ii)Index metrics based on July 31, 2023, ratings and pricing data and latest portfolio data available to us. (iii)Index metrics based on Aug. 23, 2023, ratings and pricing data and latest portfolio data available to us. BSL CLO--Broadly syndicated loan collateralized loan obligation. SPWARF--S&P Global Ratings' weighted average rating factor. WARR--Weighted average recovery rate. O/C--Overcollateralization.

Table 2

Notable U.S. BSL CLO obligor downgrades
Action date Issuer name GIC Current Previous Rank within U.S. BSL CLOs
7/13/2023 Project Alpha Intermediate Holding Inc. Software B-/Stable B/Watch Neg 251 to 500
7/18/2023 Tosca Services LLC Containers and packaging CCC+/Negative B-/Negative 501 to 750
7/18/2023 Midwest Physician Adminstrative Services LLC Health care providers and services B-/Negative B/Stable 501 to 750
7/21/2023 Anchor Glass Container Corp. Containers and Packaging SD CCC/Negative 501 to 750
7/28/2023 U.S. Renal Care Inc. Health care providers and services D CCC+/Stable 501 to 750
8/10/2023 Rackspace Technology Global Inc. IT services SD CCC+/Negative Top 250
8/15/2023 Cano Health Inc. Health care providers and services CCC-/Negative B-/Negative 501 to 750
8/17/2023 Level 3 Financing Inc. Diversified telecommunication services CCC+/Negative B/Negative Top 250
8/17/2023 Lumen Technologies Inc. Diversified telecommunication services CCC+/Negative B/Negative Top 250
8/24/2023 Sound Inpatient Physicians Inc. Health care providers and services CCC/Negative B-/Negative 251 to 500
8/25/2023 Olaplex Inc. Personal products B-/Negative B+/Negative 501 to 750
GIC--Global industry classification. BSL CLO--Broadly syndicated loan collateralized loan obligation. D--Default. SD--Selective default.

How Different Are U.S. And European CLOs?

Few instruments have demonstrated resilience and adaptability like CLOs, which have now faced several downturns such as the Global Financial Crisis of 2008-2009 and, more recently, the COVID-19 pandemic. Their resilience and attractiveness as a floating-rate instrument in today's rising rate environment has led to the European (EUR) and U.S. CLO investor bases broadening, as they continue to be a material source of funding for leveraged loans globally.

While the overarching principles of CLOs remain consistent across the U.S. and European markets, a closer look reveals some nuances that differentiate broadly syndicated loan (BSL) CLOs in the two regions. For our full study, see our slide deck "SLIDES: U.S. And European BSL CLOs: A Comparative Overview," published on Aug. 31, 2023, but we've excerpted some of the findings below:

  • By early 2019, U.S. CLOs had higher exposures to loans from issuers rated 'CCC+' and below in 2019 (partly due to the energy and retail slowdown in 2016-2017).
  • The average 'CCC' bucket rose to 12.5% in U.S. CLOs and 8.9% in European CLOs in 2020 at the height of the pandemic-driven downturn.
  • The average 'CCC' bucket have come down significantly since then, but remains elevated (6.7% U.S. CLOs vs. 4.6% European CLOs) compared to pre-pandemic levels (4.5% U.S. CLOs vs. 2.6% EUR CLOs).
  • U.S. CLOs have experienced an uptick in exposure to assets from 'CCC' range obligors since early 2023, while the average European CLO exposure to 'CCC' assets has declined modestly over the same period.

Chart 1


Just prior to the pandemic, the median European CLO 'BB' O/C test cushions was about 5%, vs. about 4% for U.S. CLOs. During the pandemic, U.S. CLOs saw a 2.4% decline in their 'BB' cushions between March and May 2020, compared to a decline of 0.4% for European CLOs during the same time.

Chart 2


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 + (212) 438-8991;
Secondary Contact:Deegant R Pandya, New York + 1 (212) 438 1289;

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 acknowledgement 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 nonpublic 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, (free of charge), and (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

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back