S&P Global Ratings is publishing performance benchmarks under the non-model Monitor framework for rated collateralized loan obligation (CLO) transactions (see "S&P Global Ratings' Updated Assumptions For CDO Monitor Non-Model Version," published June 21, 2019). Publishing the performance benchmarks provides transparency into our view of U.S. CLOs' collateral credit quality and diversity using the non-model version of our CDO Monitor. They also highlight different CLO manager investment styles (e.g., some managers prefer to invest in loans from higher rated issuers while others prefer to maintain highly diversified portfolios).
Non-Model Monitor's Benchmarks
Chart 1 summarizes the non-model Monitor's benchmarks.
Chart 1
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 second-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 is downgraded to a non-performing rating ('CC', 'SD', or 'D'), the monitor metrics of the portfolio will exclude exposure to said obligor.
From July 27, 2021, onwards, the calculation for the CLO pool's weighted average life will use a 360-day year instead of a 365-day year, which was used previously.
Non-Model Monitor Benchmarks
U.S. reinvesting broadly syndicated loan (BSL) and middle-market (MM) CLO comparison
Table 1 shows the average second-quarter 2021 metrics for U.S. reinvesting BSL and MM CLOs.
Table 1
| Average Second-Quarter 2021 U.S. CLO Metrics | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SPWARF | DRD | ODM | IDM | RDM | WAL (years) | |||||||||
| BSL CLOs | 2703 | 809 | 207.00 | 23.86 | 1.17 | 4.96 | ||||||||
| MM CLOs | 3923 | 639 | 70.19 | 14.37 | 1.02 | 3.75 | ||||||||
| 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 S&P Global Ratings' weighted average rating factor (lower credit rating distribution);
- Shorter average tenor; and
- Lower average obligor diversity measures and industry diversity measures.
U.S. CLO metrics
Table 2 shows the second-quarter 2021 portfolio metrics for the S&P Global Ratings-rated U.S. CLOs (click link to download full 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 |
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 |
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