Moody's warns that most Aaa CLOs may lose their top rating

Moody’s says that it expects to complete its current phase of CLO downgrades by the end of the third quarter – in the case of US deals – and by the end of the year for European CLOs. The agency, which has been much quicker to downgrade CLOs than its rivals, said today that it has downgraded at least one tranche of 86% of the CLOs it rates.

These include 132 tranches originally rated Aaa, which have been downgraded by between two and five notches. The rating agency says that a majority of Aaa CLO tranches may have lost their top rating by the end of this phase of downgrades.