Mezz investors face wipe-out on early Blackrock CLO, suggests Moody's

Mezzanine investors in an early CLO managed by Blackrock are likely to suffer principal losses, suggests Moody’s, which has downgraded the class B notes of Longhorn CDO (Cayman). The deal, which closed in 2000, has only class B and class C notes outstanding, tranches originally rated Baa2 and Ba3. The more senior classes have paid down.

According to Moody’s, the deal’s outstanding balance of performing assets and cash stands at only $17.8 million, less than outstanding balance of $22 million on the class Bs. The deal owns a further $2.3 million of defaulted securities, but Moody’s says these are expected to have low recoveries. That would leave class B investors taking a principal hit and, presumably, the holders of the $10 million of outstanding class Cs being wiped out entirely.

Moody’s downgraded the class Bs from Caa3 to Ca and left the class C rating at C.