Moody's wraps up its CLO rating sweep

Moody’s announced late last week that it has completed its CLO ratings sweep which commenced in June. Moody’s took a look at the ratings of 2,912 tranches from 561 US CLOs resulting in upgrades to 2,867 tranches. The rating agency finished applying its revised rating assumptions to European CLOs last month – see Upgrades galore as Moody’s completes its European CLO rating sweep.

In much the same fashion, a wave of triple-A CLO notes have been upgraded back to their original level. 86% of US CLO tranches originally rated triple-A have regained this rating compared to 47% before the rating sweep.

Junior debt classes were upgraded more heavily with an five-notch average increase compared to a two notch average for senior CLO tranches. However, Moody’s adds that only 35% of US CLOs originally rated below triple-A have managed to claw their way back to their original levels. Of this 35%, a few CLO tranches were upgraded to beyond their original rating.