CLOs reverse par value decline, calculates Wells Fargo

Wells Fargo Securities calculates that the number of CLOs failing their overcollateralisation (OC) tests has fallen for the first time this year. In the bank’s latest structured credit research report, analyst Dave Preston points out that although default levels are rising, this is mitigated by shrinking triple C buckets. The result is that 48 post 2002 deals – down from 50 last month – are now failing their senior OC test, while 278 deals are failing their junior OC test – down from 281 last month. Deals from the 2006 and 2007 vintages account for the majority of deals that are failing tests.