Four-name bid list results in high trades

By Mike Peterson

Thursday, January 14, 2010

Details have emerged of a $49 million secondary CLO auction that took place at the start of this week

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Comment by: Anonymous. Posted 14 years ago [2010-01-18 05:39:47]

Maybe the problem is that the rating agencies try to "rate across the cycle" when CLO's in fact "are the cycle" so you get patterns of long periods of no defaults followed by short periods of high defaults. Perhaps the rating agencies need to re-assess their fundamental assumptions of using models based on average or peak defaults and start adjusting things for the economic and financial outlook as this is the largest determinant of risk on most of these investments at any point in time and it isn't factored into their models at any stage

Comment by: Anonymous. Posted 14 years ago [2010-01-14 20:56:36]

No one looks at the ratings anymore. That is why everyone quotes original ratings to indicate seniority in the capital stack and subordination, rather than current ratings. If is wasn't for bank capital calculations being based on ratings most deals would pull the analysis to stop paying the agencies a fee. The agencies need to make some huge steps to regain the respect of Wall St and Main St in regards to structured credit

Comment by: Douglas Watson. Posted 14 years ago [2010-01-14 16:59:23]

Question: Is the market getting ahead of itself in the drive for yield and the fear of being left behind? Or did Moody's use too conservative assumptions when they revamped their CLO rating models earlier last year? Or both? One thing is clear, the market is disregarding Moody's ratings if these covers are any indication. The issue for the rating agencies is that they appear unable to make rating adjustments in CLOs (or structured financings generally)in a timely manner that would actually reflect current default and recovery expectations.

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