Average US CLO will breach its junior test by mid-year, says JP Morgan
JP Morgan calculates that the average US CLO overcollateralisation ratio will fall by 3-4% by June 2009 as a result of new loan defaults and the rise in triple C assets
There seems to be no clear pattern in terms of vintage. Though, as the last poster points out, this may filter through over time. At the moment most deals across vintages are clustered at 2-4% cushion to the junior OC, with a few outliers on either side.
What will be interesting to watch is how the later vintage CLOs (2005-2007) compare to the earlier CLOs which have built up more excess spread. As corp debt demand was high, underwriting standards worsened and a lot of the debt could get issued despite being supported by weak covenant packages. May delay defaults a bit but recoveries are likely much lower than 50% on the whole for cov-lights.
This should further restrict the mezzanine investor universe and promote the triple-A / equity simplified structure
CLOs
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- European reset highlights weakness in mezz despite robust senior demand 1 day ago
- Elmwood prints eighth deal this year 1 day ago
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- US resets continue as Redding Ridge joins in 2 days ago
Comment by: Anonymous. Posted 15 years ago [2009-02-18 11:50:30]