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SF Credit Brief: CLO Insights 2025 U.S. BSL Index: Tariff-Related Rating Actions Begin To Weigh On CLO Metrics

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Global Tariff Tracker: Rating Actions As Of May 30, 2025


SF Credit Brief: CLO Insights 2025 U.S. BSL Index: Tariff-Related Rating Actions Begin To Weigh On CLO Metrics

(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.

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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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