Egan-Jones CLO* Summary Report (May 2025)

Egan-Jones CLO* Summary Report (May 2025)

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

Slowdown – living up to its reputation as a fair-weather friend, CLOs, along with other structured finance products, has slowed issuance due to market turmoil. CLOs issued in April declined from 86 ($35B) in 2024 to 58 ($23B) in 2025. Perhaps concerns over tariffs and the impact on credit quality is the major driver. Regarding credit quality, WARS has improved (see chart below left). The CCC+ or lower rated CLO assets have also declined as indicated in chart I-D.  Regarding yields, as can be seen from the chart below right both asset and liability yields (see the chart below right).

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 April 2025, Egan-Jones rated 1792 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 3642, 3753, and 3891, 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 33.1, 34.8, and 37.2, 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 4.8, 6.8, and 9.2, 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 99.0%, 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 tranches were 38.2% and 14.5%, respectively. The 25th, 50th, and 75th percentiles of senior tranche subordination levels (defaulted assets are valued at market value) were 33.2%, 34.8%, and 37.0%, respectively. The 25th, 50th, and 75th percentiles of mezzanine tranche subordination levels (defaulted assets are valued at market value) were 6.8%, 12.7%, and 20.5%, 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 7.7%, respectively. The 25th, 50th, and 75th percentiles of senior tranche coupon are 5.5%, 5.6%, and 5.8%, respectively. The 25th, 50th, and 75th percentiles of mezzanine tranche coupon are 6.2%, 7.1%, and 9.0%, 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 3.6%, 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, ANCHC 2023-26A, ANCHF 2016-3A, ANCHF 2016-4A, ANCHF 2018-5A, ANCHF 2020-12A, ANCHF 2021-13A, ANCHF 2021-14A, ANNSA 2016-2A, APID 2015-20A, APID 2015-22A, ARES 2018-47A, ARES 2018-50A, BALLY 2018-1A, BCRK 2015-1A, BTNY2 2018-1A, CANYC 2012-1RA, CANYC 2016-1A, CANYC 2017-1A, CBAM 2017-4A, CBAM 2018-5A, CBAM 2018-6A, CGMS 2013-1A, CGMS 2017-4A, CGMS 2018-3A, CIFC 2017-2A, CIFC 2017-4A, CIFC 2018-3A, CLRCK 2015-1A, DEN12 2016-1A, DRSLF 2015-38A, EATON 2014-1RA, EATON 2015-1A, GALXY 2015-21A, GALXY 2018-26A, GLGU 2018-1A, GOCAP 2015-26A, GUGG4 2016-1A, HLA 2017-1A, HLA 2017-2A, HLM 11A-17, ICG 2014-2A, ICG 2018-1A, KKR 11, KKR 12, KKR 18, KKR 20, KKR 21, KKR 9, KNGPT 2024-1A, LCM 15A, LCM 24A, LCM 38A, LNGPT 2017-1A, MAGNE 2015-12A, MAGNE 2015-15A, MAGNE 2018-20A, MDPK 2018-27A, MORGN 2018-2A, MORGN 2019-4A, MP8 2015-2A)

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