Fitch: Improved Loan Prices Soften Haircut Punch for U.S. CLOs

CHICAGO--(BUSINESS WIRE)-- Improving oil & gas loan prices helped to mitigate the impact from default and 'CCC' haircuts in U.S. CLOs with exposure to the sector, according to Fitch Ratings in its latest U.S. CLO index.

Average senior overcollateralization ratio and par gain declined at a slower pace than in the previous quarter while exposure to defaulted issuers decreased to 0.4% from 1.1% of the index portfolio. The decline in defaulted exposure resulted from several previously defaulted borrowers emerging from bankruptcy. Also contributing to the decline was the reversal of defaulted classification of Murray Energy and the addition of newer CLOs with less seasoned and healthier portfolios.

At the same time, U.S. CLO exposure to Fitch's Loans of Concern inched up to 6.4% from 4.9%. This could be a harbinger that the slowdown in declines of some performance metrics maybe a short-lived trend, especially if loan prices retreat from the recent gains. Fitch revised its Loans of Concern methodology in 2Q, with the aforementioned 1Q and 2Q exposures presented on a restated basis. On the other hand, lower loan prices will provide CLO managers of CLOs still in their reinvestment period with opportunities to build portfolio par.

Fitch U.S. CLO Index report highlights recoveries on some of the recently completed restructurings of defaulted issuers in U.S. CLOs. The report also examines the drivers of par and OC losses and gains for CLOs with the largest positive and negative quarterly changes. Fitch's latest 'U.S. CLO Index' and 'U.S. CLO Tracker' are available at 'www.fitchratings.com' or by clicking on the links embedded in this release.

Additional information is available at www.fitchratings.com

Related Research

U.S. CLO Index: Improved Loan Prices Soften the Haircut Punch

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885656

U.S. CLO Tracker Pre-2015 Vintage

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885831

U.S. CLO Tracker Vintage 2015 and 2016

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885884

US CLO Tracker Portfolio - Jul. 06, 2016

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885886

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160801005869/en/

Fitch Ratings
Alina Pak, CFA
Senior Director
+1-312-368-3184
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Kevin Kendra
Managing Director
+1-212-908-0760
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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