Egan-Jones CLO* Summary Report (April 2025)

Egan-Jones CLO* Summary Report (April 2025)

*All Egan-Jones ratings in this report are non-NRSRO ratings

Passing Storm – as of a year ago, regular concerns were voiced about a pending recession and companies’ ability to absorb increased interest rates. Those concerns are now being replaced by a search for yield, particularly with the downdraft in equity market returns. Reflecting this dynamic is the decline in both asset and liability yields (see the chart below right) and the improvement is WARS (see chart below left). The CCC+ or lower rated CLO assets have also declined as indicated in chart I-D. With the rise in tariffs, probably US issuer revenues will improve, but costs are likely to increase. Regarding issuance, CLOs issued in March rose from 80 ($33B) in 2024 to 105 ($47.8B) in 2025¹. Perhaps the market is settling into a more normal pattern after weak issuance in 2024.

Currently, Egan-Jones tends to have a more positive view of CLO credit quality as compared to other credit rating agencies, as demonstrated in the table below.

I. Deal Key Metrics Summary

As of March 2025, Egan-Jones rated 1805 CLO deals. We collected and calculated available deal level, tranche level and asset level key metrics such as deal weighted average rating factor and tranche subordinations, compared with prior period(s) analysis results and summarized highlights below.

I-A. Weighted Average Rating Score

Egan-Jones collected the weighted average rating score (WARS)³ of covered CLO deals. The 25th, 50th, and 75th percentiles of the WARS value were 3631, 3741, and 3867, respectively.

I-B. Diversity Score

Egan-Jones collected the Diversity Score (DS)⁴ of covered CLO deals. The 25th, 50th, and 75th percentiles of the DS value were 58, 65, and 71, respectively.

I-C. Super Senior Tranches Subordination

Egan-Jones collected the senior tranches subordination⁵ (%) (STS) of covered CLO deals. The 25th, 50th, and 75th percentiles of the STS value were 34.3, 35.6, and 38.0, respectively.

I-D. CCC+ or Lower Rating Percentage

Egan-Jones collected the CCC+ and Lower Rated Asset Percentage (%) (CLRA) of covered CLO deals. The 25th, 50th, and 75th percentiles of the CLRA value were 4.4, 6.6, and 9.0, respectively. Egan-Jones calculated and compared the monthly average value of CLRA data from May 2022 to this month. The mean value of CLRA has increased over the observed period, which indicates the percentage of lower rated assets might be increasing.

I-E. CLO Leverage Summary

Note: Deal balance is the sum of current balance of all deal tranches; Debt balance is the sum of current balance of all debt tranches.

Egan-Jones reviewed various liability / asset metrics. The 25th, 50th, and 75th percentiles of the total deal balance to collateral balance (total current tranches balance / current collateral balance) were 95.0%, 98.0%, and 100.0%, respectively. The 25th, 50th, and 75th percentiles of the debt balance to collateral balance (current non-equity tranches balance / current collateral balance) were 107.0%, 108.0%, and 110.0%, respectively.

II. Tranche Key Metrics Summary

II-A. Tranche Subordination Analysis

The average subordination levels (defaulted assets are valued at market value) of senior tranches and mezzanine tranches were 38.6% and 15.7%, respectively. The 25th, 50th, and 75th percentiles of senior tranche subordination levels (defaulted assets are valued at market value) were 34.4%, 35.7%, and 37.7%, respectively. The 25th, 50th, and 75th percentiles of mezzanine tranche subordination levels (defaulted assets are valued at market value) were 8.3%, 14.3%, and 21.8%, respectively.

The mean, 25th, 50th, and 75th percentiles of the available subordination of each rating category (includes +/-) can be found in the table above.

II-B. Tranche Coupon Analysis

The average coupon of senior tranches and mezzanine tranches are 5.6% and 7.8%, respectively. The 25th, 50th, and 75th percentiles of senior tranche coupon are 5.5%, 5.7%, and 5.8%, respectively. The 25th, 50th, and 75th percentiles of mezzanine tranche coupon are 6.3%, 7.1%, and 9.1%, respectively.

The mean, 25th, 50th, and 75th percentiles of the available coupon of each rating category (includes +/-) can be found in the table above.

II-C. Tranche Spread Analysis

The average spread (over 3 months SOFR) of senior tranches and mezzanine tranches are 1.4% and 3.7%, respectively. The 25th, 50th, and 75th percentiles of senior tranche spread (over 3 months SOFR) are 1.2%, 1.4%, and 1.5%, respectively. The 25th, 50th, and 75th percentiles of mezzanine tranche spread (over 3 months SOFR) are 2.0%, 2.9%, and 5.2%, respectively.

The mean, 25th, 50th, and 75th percentiles of the available spread (over 3 months SOFR) of each rating category (includes +/-) can be found in the table above.

II-D. Egan-Jones Ratings vs Other Agencies

Below is a summary of Egan-Jones ratings compared with other agencies. For the detailed full listing and sorting of Egan-Jones’s CLO ratings, please visit our website at https://egan-jones.io/non-nrsro-ratings/clo.

Egan-Jones's Key Rating Features & Differences Compared With Others

Below is a summary of Egan-Jones's approach (see our Methodology for a more complete description):

1. Our rating is derived from estimated losses.

2. The probabilities of default utilized are generally more conservative than industry standards.

3. Generally, our ratings are more heavily model driven and take into account fewer subjective assumptions.

4. Generally, we update the cashflow and ratings monthly based on the availability of the trustee reports.

5. Our analysis is conducted using information and cash flow engines supplied by a recognized industry provider.

6. For some transactions, when senior tranches are being paid down/off, our ratings on subordinated tranches generally move higher than the initial rating due to the improved tranche subordination and resulting in less estimated loss. To avoid confusion, we exclude from the chart above the impacted transactions. (ALLEG 2017-2A, AMMC 2016-18A, ANCHF 2015-2A, ANCHF 2016-3A, ANCHF 2016-4A, ANCHF 2018-5A, ANCHF 2020-10A, ANCHF 2020-11A, ANCHF 2021-13A, ANCHF 2021-14A, ANNSA 2016-2A, APID 2015-20A, APID 2015-22A, ARES 2018-47A, BALLY 2018-1A, BCRK 2015-1A, BRIST 2016-1A, CANYC 2012-1RA, CANYC 2016-1A, CANYC 2017-1A, CATLK 2015-3A, CATLK 2021-8A, CFIP 2021-1A, CGMS 2012-3A, CGMS 2015-5A, CIFC 2013-1A, CIFC 2017-2A, CIFC 2023-3A, CIFC 2024-1A, CRMN 2018-1A, DCLO 2021-2A, DRSLF 2015-38A, DRSLF 2017-47A, DRSLF 2022-112A, EATON 2014-1RA, EMPWR 2023-3A, EMPWR 2024-1A, FCBSL 2019-2A, FWIA 2019-1A, GLM 2019-6A, GSM 2021-5A, GSM 2021-6A, GSM 2022-7A, GUGG4 2016-1A, HLM 2024-20A, HLSY 2021-4A, HPSPR 2023-1A, KCAP 2017-1A, KKR 11, KKR 13, KKR 49A, KNGPT 2024-1A, LCM 32A, LCM 40A, MDPK 2016-20A, MDPK 2022-62A, MDPK 2023-61A, MDPK 2024-67A, MORGN 2018-2A, MORGN 2018-3A, MORGN 2019-4A, MP8 2015-2A, NWML 2023-IA, RAD 2019-5A, RAD 2019-6A, TRNTS 2017-6A, WINDR 2016-1KRA)

III. Pool Asset Key Metrics Summary

This section summarizes the characteristics of the underlying loans in the CLO deals.

III-A. Asset Distribution

III-B. Asset Coupon Analysis

III-C. Asset Rating Analysis

III-D. Asset Default Analysis

Footnotes and sources

1. https://finsight.com/collateralized-loans-clos-abs-bond-issuance-overview?products=ABS&regions=USOA

2. Adj asset coupon means gross asset coupon minus the asset estimated losses which is assumed 50% of loss given default.

3. Weighted Average Rating Score is derived from 10-year default rate and used to calculate the weighted average default probability of the portfolio.

4. Diversity Score represents the number of independent, identical assets that we can use to mimic the default distribution of the actual portfolio.

5. Tranches Subordination is calculated as (Collateral Value - (Pari-Passu Balance + Senior Balance)) / Collateral Value. Defaulted assets are valued at market value.

6. For more details, please refer to Egan-Jones's CLO methodology