This report does not constitute a rating action.

Project finance collateralized loan obligations, or PF CLOs, are becoming an increasingly favored asset class in Asia-Pacific. And S&P Global Ratings expects the growth momentum to continue, given the solid financing needs of infrastructure sectors. The motivation of high-profile repeat sponsors to develop these instruments is an additional driver.

Investors have also indicated to us that they expect the use of PF CLOs will continue to increase. And they've also asked for clarification over how we rate such instruments in this region. We'll address this and their other top questions.

Market participants use other terms interchangeably for PF CLOs. These include collateralized debt obligations (CDOs) of PF debt, infrastructure asset-backed securities (IABS), and infrastructure loan-backed securities (ILBS).

Frequently Asked Questions

What are key infrastructure industry trends for PF CLO issuance?

S&P Global Ratings expects the origination of underlying assets for PF CLO will continue to benefit from sound financing needs for the infrastructure sector, supporting the growth for PF CLO issuance in Asia-Pacific. Project finance is just one funding instrument for infrastructure. In our discussions of PF CLO, we focus only on project finance debt, as defined in our project finance criteria.

Considering that the underlying assets for PF CLO in Asia-Pacific could be located anywhere in the world, we will provide a snapshot of infrastructure financing trends globally when discussing the origination of the underlying asset.

The World Bank's database of Private Participation in Infrastructure shows investments have returned to the pre-pandemic level in a global context. Total investment commitments in infrastructure projects with private participation in low- and mid-income countries was over US$90 billion per year on average between 2010 and 2023, though there was a more noticeable dip in 2020 and 2021 during the pandemic.

Infrastructure projects in East Asia and the Pacific accounted for about 44% of the total investment commitments on average between 2017 and 2023. The energy sector received the lion's share of investment, accounting for 44% of the total on average during 2013-2022. In 2023, energy infrastructure drew over 70% of total such investment in the regions.

What are the key developments and structural features of PF CLO in Asia-Pacific?

Issuance trend 

Bayfront Infrastructure Capital Pte. Ltd (BIC) launched the first PF CLO in the region in 2018, with an issuance volume of US$458 million.

A total of eight public and at least one private PF CLO transactions have been issued in the region by two key sponsors, Bayfront Infrastructure Management Pte. Ltd. (Bayfront) and Hong Kong Mortgage Corp. Ltd. (HKMC). This brings the total historical issuance volume of public PF CLO transactions in Asia-Pacific to US$3.54 billion as of May 2025.

Bayfront's main shareholder, Clifford Capital Holdings Pte. Ltd. (CCH) is a government-related entity (GRE) of the Singapore government. The other shareholder is the Asian Infrastructure Investment Bank. The first Bayfront transaction was sponsored by an affiliate of CCH. HKMC is also a GRE of the Hong Kong government. Both Bayfront and HKMC have a mandate to promote infrastructure financing. Because of the motivation of these high-profile repeat sponsors, we expect to see growth in PF CLO issuance in Asia-Pacific.

The BIC series sponsored by Bayfront has consistently issued one deal per year since 2021, while the Bauhinia series sponsored by HKMC has issued one deal per year since 2023. Issuance size ranges from US$400 million-US$530 million, and the size of the transactions from one sponsor has been edging up for the past two years.

Capital structure 

Past transactions typically issued three to four classes of floating-rate U.S. dollar notes, together with subordinated notes or preference shares. Credit enhancement for the most senior tranches ranges from 25%-30%.

Industry diversification 

A high proportion of underlying assets are energy-related industries. According to the issuers' industry definition, conventional power and water projects have been one of the top five industries in most previous transactions, accounting for 8%-36% of the asset portfolio. The concentration of water and power projects dropped to roughly 10% in the most recent deals, from around 30% during 2018-2024 deals. Renewable energy is another popular sector, accounting for 12%-30% of the portfolio over the same period. Liquified natural gas assets are one of the top industries in this category.

Deals during 2024-2025 have become slightly more diversified in terms of industry distribution, spanning more subsectors according to issuers' definition, and having lower total concentration in the top two industries. For older transactions, the top two industries accounted for about 50% of the portfolio, but the ratio dropped to approximately 30% for the most recent transactions. We consider these features as favorable in our rating analysis.

How different are Asia-Pacific PF CLO transactions to U.S. CLOs?

U.S. CLOs are characterized mainly based on transactions that we rate. Characteristics for Asia-Pacific PF CLOs are based on public information, and we do not rate the transactions.

Attribute	Asia-Pacific PF CLOs	U.S. Broadly Syndicated Loan (BSL) CLOs	U.S. Middle Market (MM) CLOs
Outstanding amount	About US$2.3 billion as of Mar/Apr 2025	About US$ 955 billion as of Jan. 2025	About US$132 billion as of Jan. 2025
CLO managers	Over the past year, two managers have issued one or more PF CLO transactions.	Over the past year, about 125 managers have issued one or more BSL CLO transactions.	Over the past year, about 35 managers have issued one or more MM CLO transactions.
Issuer motivation	PF CLO managers are typically partially or fully supported by governments to provide financing for infrastructure.	Managers typically use BSL CLOs to build assets under management and generate fee income.	Many direct lenders use MM CLOs to fund their lending business, alongside other funding sources such as business development companies (BDCs), separately managed accounts, etc.
Collateral loans	Mostly senior ranking project and infrastructure loans.	Mostly senior secured loans sourced from the primary and secondary BSL market, typically to companies with EBITDA of several hundred million dollars or more.	Mostly senior secured loans from direct lenders, typically to companies with an EBITDA of less than US$100 million. Some segment the middle market by EBITDA size of the companies (i.e., lower, core, and upper).
Source of CLO collateral	PF CLO managers purchase the loans from banks directly or from parent companies.	BSL CLO managers purchase the loans for their CLOs in the open market to create a portfolio.	Many MM CLO managers (or their affiliates) are direct lenders and issue some or most of the loans in their CLOs. Some MM CLO managers also acquire loans from other managers.
CLO equity holder	Typically a CLO sponsor or its parent company will hold subordinated notes or preference shares, if applicable.	Historically, most BSL CLO managers have placed CLO equity with third-party investors, including captive equity funds. Some managers hold some or all of the equity from their own CLOs.	Many MM CLO managers hold their own CLO equity, although some also have third-party equity holders in their CLOs. CLO equity may also be held by BDCs affiliated with the manager.
Risk retention	Risk retention mechanisms are in place. Typically, the CLO sponsor or its parent company will hold subordinated notes or preference shares. In one of the most recent deal, there is additional 5% risk retention across all classes of notes held by the CLO sponsor.	U.S. BSL CLOs are generally not subject to risk retention since the manager acquires the loans in the open market (see LSTA v. SEC, No. 17-5004, D.C. Circuit Feb. 9, 2018).	MM CLOs are generally subject to risk retention since the manager (or its affiliate) originates some or all the loans in the CLO.
Loan covenants	No available public information.	Covenant-lite loans are the norm in the BSL market, accounting for 85% or more of the outstanding loans.	A large majority of loans in MM CLOs have maintenance covenants (i.e., are not covenant-lite). Generally, the smaller the borrower the more lender-friendly the loan document provisions will be.
Collateral ratings and credit estimates	No available public information.	We rate more than 95% of the companies in BSL CLO collateral pools.	Varies significantly across CLOs, but more than 85% of the loans in our MM CLOs collateral pools come from credit-estimated companies.
Loans from 'B-' and 'CCC' companies/projects*	No available public information.	About 26.0% of the total assets comprise 'B-' rated companies, and 5.3% are in the 'CCC' range. The typical basket for assets from obligors rated in the 'CCC' category is 7.5%.	About 73.4% of total assets comprise 'B-' rated companies, and 13.9% are in the 'CCC' range. Baskets for assets from obligors rated or credit estimated in the 'CCC' range is typically 17.5% or larger.
Weighted-average spread (WAS) of portfolio loans	Average is SOFR + 254 basis points (bps). §	Average is SOFR + 348 bps.	Average is SOFR + 559 bps.
Number of obligors in CLO pool	PF CLO collateral pools tend to have a smaller group of obligors than U.S. CLOs. The number of obligors approximates 25-36.	BSL CLO collateral pools are highly diverse. The number of obligors varies, but the average is 333.	MM CLO collateral pools are less diverse compared with BSL CLOs. The number of obligors varies from 50 to more than 150, but the average is 107.
Number of industries in CLO pool†	Ranges from 8 to 13 sectors of industry, based on the CLO manager's industry definition.	The average BSL CLO collateral pool has an effective industry count of about 24 sectors.	Varies, but the average MM CLO collateral pool has an effective industry count of about 15 sectors.
Asset location	Distributed across 15 countries on average.	U.S.	U.S.
CLO most senior tranche subordination	Typically ranges from 25% to 30%.	Typically ranges from 34% to 39% (median is 37.0%) for 'AAA' rated tranches.	Typically ranges from 40% to 46% (median is 42%) for 'AAA' rated tranches.
*Companies rated in the 'CCC' range include companies rated 'B-' on CreditWatch negative. §Excluding transactions that have most of the assets priced in LIBOR at transaction close.†Industry classifications for PF CLO and CLO backed by corporate loans could be different in our relevant criteria and in nature. Note: Data for Asia-Pacific transactions are as of transaction close. Data for U.S. transactions are as of Q4 2024. BSL--Broadly syndicated loan. MM--Middle market. CLO--Collateralized loan obligation. SOFR--Secured overnight financing rate. Source: Public information from CLO Managers' website for Asia-Pacific transactions compiled by S&P Global Ratings, and "Good Things Come In Small Packages: A Short Primer On Middle Market CLOs," published March 27, 2025, for U.S. transactions.

What is the scope of the PF CLO criteria?

According to "CDOs Of Project Finance Debt: Global Methodology And Assumptions," published July 26, 2024, our PF CLO criteria applies to all project finance debt (loans and bonds) that are included in either cash flow or synthetic CDOs. They may also apply to the analysis of project finance debt backing other types of securities. When deciding the scope of PF CLO criteria, we also typically consider portfolio diversification, construction risk, and whether a hybrid portfolio contains other types of debt.

Diversification 

The criteria don't apply to CDOs backed by portfolios exhibiting low diversification. For these transactions, the PF CLO criteria would be a starting point, and we typically make specific assumptions according to our assessment of the credit risk associated with these pools. Typically, Asia-Pacific transactions have smaller portfolios than traditional BSL and MM CLOs in the U.S., with 25 projects at minimum, given the nature of project finance sector.

For Asia-Pacific deals, ratings could be more likely to be driven by the largest obligor default test and largest industry default test due to a relatively concentrated pool. According to the PF CLO criteria, highly rated projects are subject to fewer obligor defaults, and this will likely result in lower loss levels in the largest obligor default test and the alternative largest industry default test. Similar tests are also applied to BSL and MM CLOs globally, regardless of the type of debt in a portfolio.

Projects in construction phase 

The criteria don't apply to CDOs backed by a significant proportion of project finance debt, the underlying project of which is still in its construction phase. For these transactions, the PF CLO criteria would be a starting point, and we typically make specific assumptions according to our assessment of the credit risk associated with these pools.

Generally, 13% of the portfolios on average in Asia-Pacific are still under construction, based on public information at transaction close.

Hybrid portfolio 

For a hybrid portfolio, which contains not only project finance debt, the PF CLO criteria will only apply to project finance debt, including bonds, as defined in our project finance criteria. For the other types of debt, such as corporate loans, we would apply our "Global Methodology And Assumptions For CLOs And Corporate CDOs" criteria (corporate CLO criteria) published June 21, 2019, or other relevant criteria.

What are the unique features of Asia-Pacific transactions? How are they considered in S&P Global Ratings' methodology?

Guarantee from export credit agencies (ECAs) and multilateral financial institutions (MFIs) 

ECAs and MFIs often provide various financing products such as guarantees to support projects in Asia-Pacific deals. They are typically government agencies or act on behalf of the government. We have therefore typically considered their creditworthiness to be equivalent or close to that of their respective sovereign.

For projects guaranteed by ECAs or MFIs against commercial risks (non-payment risk), we apply our "Methodology And Assumptions For Assessing Portfolios Of International Public Sector And Other Debt Obligations Backing Covered Bonds And Structured Finance Securities" criteria published Dec. 9, 2014. Given our observation that in Asia-Pacific PF CLO deals, most pools of assets guaranteed by a given ECA or MFI exhibit low granularity, we may take a credit substitution approach, whereby the ECA or MFI-guaranteed portions of the projects are modeled as sovereign exposure to the home country of the ECA/MFI in CDO Evaluator (see relevant section below). The proportion of projects supported by ECAs or MFIs varies across different deals. It could range from low single digits to about 38% in the region.

For other insurance or guarantees provided by entities that aren't ECAs or MFIs, we will use our "Guarantee Criteria," published Oct. 21, 2016, and the insurance policy will be given credit only if certain conditions are met in the criteria.

Participation 

Due to contractual limitation, third-party consent requirements, and other reasons, some projects in Asia-Pacific portfolios remain as participation interest during the lifetime of a transaction. That's in contrast to other regions, such as the U.S. where the participation interest would usually be elevated into assignment within certain periods after the deal close.

Consequently, if the participation seller files for bankruptcy, the bankruptcy case may delay or otherwise disrupt the participation seller's ability to service the loan and to forward loan proceeds to the participation buyer. Therefore, the participation seller's creditworthiness could become a risk to the rated notes.

In Asia-Pacific deals, those participation sellers are typically banks with high investment-grade ratings at closing, as required by transaction documents, or the sponsor's parent company with an investment-grade rating. The proportion of participation interest in Asia-Pacific portfolios varies from 9%-46%. More details regarding the bivariate-risk asset basket limitation can be found in our corporate CLO criteria.

Multi-jurisdictional transactions 

PF CLO deals in Asia-Pacific are multi-jurisdictional and projects could be located anywhere in the world, including emerging markets. Based on public information, the concentrations for some portfolios might exceed the thresholds for countries rated from 'BBB' to 'B', based on our "Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions" criteria, published Jan. 30, 2019. In this case, we would apply additional stress. Details can be found in the aforementioned criteria.

What are other rating considerations?

Passive investment 

The reinvestment period of Asia-Pacific transactions ranges between two and 3.5 years. During this time, transactions allow acquisition of new assets in certain limited circumstances. This includes, but is not limited to, full repayment of existing assets, disposal of defaulted or credit impaired assets, and cancellation of undrawn commitments. Transaction documents tend to require that the purchase of such new assets should meet certain conditions and not fail coverage tests.

We might apply our "stable quality" approach in our rating analysis. As such, we would focus our credit analysis primarily on the characteristics of the actual portfolio instead of a stressed portfolio, if the portfolio characteristic won't shift adversely and drastically during the reinvestment period. This is because active reinvestment is not common in PF CLO transactions in Asia-Pacific, and the transactions usually have documented commitments to generally prevent material deterioration of the portfolio's credit quality as a condition of reinvesting. For more details on our "stable quality" approach, please refer to our corporate CLO criteria.

Undrawn/Unfunded commitments 

We have seen Asia-Pacific transactions with some undrawn commitments, which ranged between 0% and 16% in past transactions. Risk factors that we might encounter include relatively low or uncertain fees or cash flows received on the undrawn amount before the commitment is fully drawn, and whether there are measures adopted to ensure that the supported securities will not be exposed to a commitment provider's credit risk, such as depositing an amount equal to the undrawn commitment to the CLO at transaction close.

What are the tools used by S&P Global Ratings to analyze a CLO transaction?

We typically use two proprietary models, CDO Evaluator and Cash Flow Evaluator, to analyze a CDO deal, including PF CLO. External parties can download both of these from the Structured Finance Product Distribution webpage https://platform.ratings360.spglobal.com/.

CDO Evaluator 

We use our CDO Evaluator model to generate a probability distribution of potential default rates for the given portfolio of assets in aggregate under different levels of stress consistent with the corresponding rating levels. The model also derives a set of scenario default rates (SDRs), which is the gross level of asset defaults that we generally expect a CDO tranche with that rating to be able to withstand.

Key inputs in CDO Evaluator:

• Obligor ID
• Obligor rating
• Industry category
• Principal amount
• Tenor (see PF CLO criteria for more detail, including instances where weighted-average maturity or legal final maturity might be used as an input in CDO Evaluator)
• Country where the project is located and the associated sovereign rating and transfer and convertibility (T&C) assessment for the country
• ECA-related information, such as home country supporting the ECA and the associated sovereign rating and T&C assessment, if applicable
• Participating bank/entity and the associated rating, if applicable, and
• Other relevant factors

Cash Flow Evaluator (CFE) 

We typically use this model for our cash flow analysis of CDO transactions. We review a transaction's structural characteristics and level of enhancement. Meanwhile, we test various scenarios, based on key rating drivers, such as interest rates, default timing and patterns, to determine the maximum level of defaults that a transaction may sustain while still repaying noteholders in full and on time. This is the breakeven default rate (BDR).

Key inputs in the model are:

• Priority of payment
• Triggers
• CDO capital structure including tranche balance, tranche interest rate, etc.,
• Underlying asset information including project balance, interest rate, amortization schedule, recovery rate and time to recovery based on our PF CLO criteria, etc., and
• Other relevant factors.

More details for SDR and BDR, and how to determine the final rating assignment can be found in our PF CLO criteria.

Anything we should know about rating inputs from S&P Global Ratings' credit estimates or other credit rating agencies in CDO Evaluator?

A credit estimate from S&P Global Ratings is a point-in-time analysis, and thus it won't carry a CreditWatch status. As a result, we would not apply a similar notching approach for ratings under CreditWatch from us or other credit rating agencies. Furthermore, there is no additional adjustment for credit estimates.

Under certain circumstances, we may use public ratings from another credit rating agency as our rating input. However, the principal balance of the collateral relying on rating inputs from other ratings agencies may not exceed 15%, in accordance with the corporate CLO criteria. This is also applicable to PF CLO.

More details for alternative means to determine rating inputs can be found in the "Methodology For Determining Ratings-Based Inputs" criteria, published July 26, 2024.

What are the potential impacts of proposed criteria to Asia-Pacific transactions?

We published "Request For Comment: CDOs Of Project Finance Debt: Global Methodology And Assumptions," (RFC) on March 19, 2025. If adopted, the proposed criteria will supersede the PF CLO criteria.

Asset type classification 

Our PF asset type classification increased to 35 asset type codes from eight under the RFC. The greater code granularity will allow us to better reflect industry risk as those sectors continue to evolve. From an outcome perspective, it is likely to result in higher industry diversity in the largest industry test for tranches rated 'AAA' or 'AA'.

Recovery assumptions 

In terms of recovery analysis, the recovery rate assumption for project loans in all country groups increased across all rating levels, reflecting our observation and analysis on recovery rates from more and newer empirical data. Emerging markets, which are mostly classified as group B and C, benefited from a higher increase in recovery rates for project loans under the RFC.

Meanwhile, the recovery timing assumption, which is the time it takes to achieve our full recovery assumption after an obligation has defaulted, will be extended from 12 months to 24 months for group A and 42 months for group B and C countries. In some circumstances, the recovery timing could be shortened to 18 months. Around 70%-98% of Asia-Pacific portfolios are concentrated in country groups B and C. The overall effect on Asia-Pacific CLO from recovery assumptions will vary and will be subject to the underlying assets' characteristics.

Default timing and patterns 

We updated the default patterns in the RFC to align with our corporate CDO criteria. The proposed patterns will consider a portfolio's weighted-average maturity to better match the pool's maturity profiles. Going forward, we will stop using the percentiles approach to determine BDR in CFE and use the minimum BDR, as adopted in corporate CLO criteria, instead.

Related Research

• Good Things Come In Small Packages: A Short Primer On Middle Market CLOs, March 27, 2025
• Request For Comment: CDOs Of Project Finance Debt: Global Methodology And Assumptions, March 19, 2025

• Methodology For Determining Ratings-Based Inputs, July 26, 2024
• CDOs Of Project Finance Debt: Global Methodology And Assumptions, July 26, 2024
• General Project Finance Rating Methodology, Dec. 14, 2022
• Sector-Specific Project Finance Rating Methodology, Dec. 14, 2022
• Global Methodology And Assumptions For CLOs And Corporate CDOs, June 21, 2019
• Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
• Guarantee Criteria, Oct. 21, 2016
• Methodology And Assumptions For Assessing Portfolios Of International Public Sector And Other Debt Obligations Backing Covered Bonds And Structured Finance Securities, Dec. 9, 2014

Primary Contact:	Yalan Tao, Hong Kong 852-2532-8033; yalan.tao@spglobal.com
Secondary Contacts:	Jerry Fang, Hong Kong 852-2533-3518; jerry.fang@spglobal.com
	Melanie Tsui, Hong Kong 852-2532-8087; melanie.tsui@spglobal.com