(Editor's Note: This report is S&P Global Ratings' monthly summary update of U.S. BSL CLO Index's credit metrics and notable credit themes.)
This report does not constitute a rating action.
Year to date, average ‘CCC’ category and nonperforming exposures across the CLO Insights U.S. BSL Index have both increased to 5.63% and 0.94% from 5.29% and 0.46%, respectively (see table 2 below for a list of companies widely held in broadly syndicated loan (BSL) collateralized loan obligations (CLOs) that have experienced downgrades since the start of April). After steadily improving since last May, average S&P Global Ratings' weighted average rating factor (SPWARF) values--a measure of overall credit quality within reinvesting U.S. BSL CLO portfolios--in May this year, deteriorated back to where they were a year ago. In addition, after declining below 13% for the first time this year, recent rating outlook revisions to negative across several issuers have pushed the average across the CLO Index back above 13% (more on that below). On a slightly less negative note, loan prices increased off the lows seen in early April, though they are still notably lower from a year ago. For now, just 13.8% of the reinvesting U.S. BSL CLO hello transactions in the index exceed the 7.5% 'CCC' threshold, while the average junior overcollateralization (O/C) cushion is still relatively healthy at 3.73%.
Table 1
U.S. BSL CLO Index metrics | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
As of date | 'B-' (%) | CCC’ category (%) | Nonperforming assets (%) | SPWARF | WARR (%) | Watch negative (%) | Negative outlook (%) | Weighted avg. price of portfolio ($) | Jr. O/C cushion (%) | % of target par | 'B-' on negative outlook (%) |
May 31, 2024(i) | 25.13 | 6.32 | 0.41 | 2670 | 59.56 | 0.91 | 15.37 | 97.32 | 4.18 | 99.68 | 4.76 |
June 30, 2024(i) | 25.03 | 6.03 | 0.33 | 2654 | 59.35 | 1.11 | 14.86 | 97.05 | 4.24 | 99.65 | 4.41 |
July 31, 2024(i) | 24.89 | 6.15 | 0.27 | 2646 | 59.26 | 0.93 | 14.92 | 97.12 | 4.24 | 99.60 | 4.21 |
Aug. 30, 2024(i) | 24.88 | 6.10 | 0.53 | 2663 | 58.87 | 1.10 | 14.64 | 97.10 | 4.17 | 99.53 | 3.75 |
Sept. 30, 2024(i) | 24.82 | 6.11 | 0.52 | 2663 | 59.04 | 1.40 | 14.83 | 97.19 | 4.04 | 99.46 | 3.82 |
Oct. 31, 2024(i) | 24.47 | 5.95 | 0.51 | 2651 | 59.07 | 1.25 | 14.14 | 97.33 | 4.07 | 99.41 | 3.47 |
Nov. 30, 2024(i) | 25.08 | 5.16 | 0.66 | 2651 | 58.76 | 1.14 | 13.27 | 97.60 | 4.02 | 99.35 | 3.58 |
Dec. 31, 2024(i) | 25.31 | 5.29 | 0.46 | 2639 | 58.64 | 1.24 | 13.31 | 97.47 | 3.97 | 99.31 | 3.74 |
Jan. 31, 2025(i) | 25.24 | 5.37 | 0.44 | 2638 | 58.27 | 0.67 | 13.23 | 97.51 | 3.93 | 99.29 | 3.62 |
Feb. 28, 2025(i) | 24.56 | 5.24 | 0.68 | 2644 | 58.24 | 0.82 | 13.18 | 97.27 | 3.91 | 99.24 | 2.86 |
March 31, 2025(i) | 23.97 | 5.35 | 0.62 | 2639 | 58.25 | 1.07 | 12.73 | 96.59 | 3.79 | 99.17 | 2.32 |
April 30, 2025(ii) | 23.91 | 5.51 | 0.63 | 2645 | 57.91 | 1.23 | 12.47 | 95.81 | 3.74 | 99.12 | 2.22 |
May 21, 2025(iii) | 23.69 | 5.63 | 0.94 | 2670 | 57.59 | 1.25 | 13.19 | 96.66 | 3.73 | 99.12 | 2.85 |
Table 2
Notable downgrades across top 500 U.S. BSL CLO obligors | |||||
---|---|---|---|---|---|
Rating | |||||
Action date | Issuer name | GIC | To | From | Rank within U.S. BSL CLOs |
April 1, 2025 | MajorDrive Holdings IV LLC | Automobiles | B-/Stable | B/Stable | 251 to 500 |
April 1, 2025 | Ontario Gaming GTA Limited Partnership | Hotels, Restaurants and Leisure | B-/Stable | B/Negative | Top 250 |
April 16, 2025 | Naked Juice LLC | Beverages | CC/Negative | CCC/Negative | 251 to 500 |
April 22, 2025 | Ascend Performance Materials Operations LLC | Chemicals | D/-- | CCC+/Negative | 251 to 500 |
April 28, 2025 | Conair Holdings LLC | Household Products | CCC+/Developing | B-/Negative | 251 to 500 |
May 5, 2025 | PLZ Corp. | Chemicals | CCC+/Negative | B-/Watch Neg | 251 to 500 |
May 7, 2025 | Fortna Group, Inc. | Machinery | CCC+/Negative | B-/Negative | 251 to 500 |
May 7, 2025 | Ivanti Software Inc. | Software | SD/-- | CCC+/Negative | Top 250 |
May 9, 2025 | CDK Global II LLC | Software | B-/Stable | B+/Negative | Top 250 |
Tracking Tariff-Related Corporate Rating Actions
S&P Global Ratings has been publishing a bi-weekly Global Tariff Tracker to track global rating actions taken where tariff pronouncements were a primary driver. Out of the 21 global rating actions listed in the most recent Tariff Tracker (see "Global Tariff Tracker: Rating Actions As Of May 16," published May 20, 2025), U.S. BSL CLOs have exposure to 15 issuers, contributing to the recent deterioration in CLO metrics noted above. Table 3 below shows these 15 issuers, along with an indication of how widely referenced they are across CLO portfolios (from "U.S. BSL CLO Top Obligors And Industries Report: First-Quarter 2025," published April 10, 2025).
For example, actions taken on widely held Hunter Douglas Finance B.V., Harbor Freight Tools USA Inc. and Conair Holdings LLC contributed to the increase in negative outlook exposures, CreditWatch negative exposures, and ‘CCC’ category exposures, respectively, noted in the May 2025 values in table 1 above.
Table 3
U.S. BSL CLO exposures across tariff-driven rating actions | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating | ||||||||||||||||||||
Date | Company | Action | Previous OLCW | Current OLCW | To | From | Industry | Country | Rank in U.S. BSL CLOs from U.S. BSL CLO top obligors and industries report: first-quarter 2025 | |||||||||||
4/15/2025 | CB Poly Investments LLC | Negative outlook revision | Stable | Negative | B | B | Consumer products | U.S. | 697 | |||||||||||
4/28/2025 | Conair Holdings LLC | Downgrade | Negative | Developing | CCC+ | B- | Consumer products | U.S. | 417 | |||||||||||
3/10/2025 | Fender Musical Instruments Corp. | Downgrade and negative outlook revision | Stable | Negative | B- | B | Media and entertainment | U.S. | 1,023 | |||||||||||
5/09/2025 | Gibson Brands Inc. | Negative outlook revision | Stable | Negative | B | B | Consumer products | U.S. | 1,232 | |||||||||||
4/04/2025 | GSM Outdoors Intermediate Holding II Corp. | Negative outlook revision | Stable | Negative | B | B | Consumer products | U.S. | 1,078 | |||||||||||
4/16/2025 | Harbor Freight Tools USA Inc. | CreditWatch negative placement | Stable | Negative | BB- | BB- | Retail and restaurants | U.S. | 80 | |||||||||||
5/12/2025 | Hunter Douglas Finance B.V. | Negative outlook revision | Stable | Negative | B | B | Consumer products | Netherlands | 60 | |||||||||||
5/14/2025 | Lakeshore Learning Materials LLC | Downgrade and negative outlook revision | Stable | Negative | B- | B | Consumer products | U.S. | 599 | |||||||||||
5/08/2025 | MillerKnoll Inc. | Negative outlook revision | Stable | Negative | BB | BB | Consumer products | U.S. | 1,140 | |||||||||||
5/06/2025 | Power Stop LLC | Negative outlook revision | Stable | Negative | B- | B- | Automotive | U.S. | 1,144 | |||||||||||
5/09/2025 | RLG Holdings LLC | Negative outlook revision | Stable | Negative | B- | B- | Chemicals, packaging, and environmental services | U.S. | 632 | |||||||||||
5/02/2025 | SSH Holdings Inc. (dba Spencer Spirit) | CreditWatch negative placement | Stable | Negative | BB- | BB- | Retail and restaurants | U.S. | 967 | |||||||||||
4/22/2025 | The Michaels Cos. Inc. | CreditWatch negative placement | Stable | Negative | B- | B- | Retail and restaurants | U.S. | 237 | |||||||||||
5/14/2025 | Traeger Inc. | Negative outlook revision | Stable | Negative | B- | B- | Consumer products | U.S. | 1,133 | |||||||||||
5/02/2025 | VC GB Holdings I Corp. | CreditWatch negative placement | Stable | Negative | B | B | Consumer products | U.S. | 374 | |||||||||||
BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. |
Overall, U.S. BSL CLO exposures across these 15 issuers stand at just over 1%. The average exposure count across the 120-plus managers of reinvesting CLOs is about 3.5 issuers (see distribution in table 4 below; some managers have no exposure while some have 4.97% exposure). These tariff-related actions have had little impact on junior O/C test cushions for now, since most of these issuers are still rated 'B-' or above. However, loan prices across these 15 exposures have declined by about six points on average over the past three months (some declined by over 10 points), and six of these issuers now are rated 'B-' with a negative outlook, causing this bucket across the CLO index to increase to 2.85% from 2.22% in May (table 1). Further downgrades on these B- rated issuers may result in future junior OC cushion decline for some CLO transactions.
Table 4
Exposure count to tariff-related actions across U.S. BSL CLO managers | ||||||||
---|---|---|---|---|---|---|---|---|
Exposure count across tariff-related rating actions (no.) | Count of managers (no.)(i) | Min. exposure to tariff-related actions (%) | Max. exposure to tariff-related actions (%) | |||||
0 | 2 | 0.00 | 0.00 | |||||
1 | 16 | 0.10 | 1.05 | |||||
2 | 20 | 0.04 | 0.80 | |||||
3 | 29 | 0.25 | 1.98 | |||||
4 | 20 | 0.13 | 2.58 | |||||
5 | 14 | 0.49 | 2.90 | |||||
6 | 14 | 0.53 | 4.11 | |||||
7 | 2 | 1.53 | 4.97 | |||||
8 | 4 | 1.25 | 1.99 | |||||
9 | 1 | 3.53 | 3.53 | |||||
(i)U.S. BSL CLO managers of reinvesting transactions. BSL--Broadly syndicated loan. CLO--Collateralized loan obligation. |
Primary Contacts: | Daniel Hu, FRM, New York 1-212-438-2206; daniel.hu@spglobal.com |
Stephen A Anderberg, New York 212-438-8991; stephen.anderberg@spglobal.com | |
Secondary Contact: | Deegant R Pandya, New York 1-212-438-1289; deegant.pandya@spglobal.com |
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