This paper provides an overview of top current Industry, Country1 and Issuer2 exposures in European CLOs as of April 20233.
It should be noted that the industry of an issuer is assigned and reported for each CLO transaction by its asset manager. It is possible and also common, to see managers reporting different industries for the same issuer. Hence, Moody’s Analytics Structured Finance team has developed the Moody’s Most Common Industry (“MMC Industry”). This is the industry most often allocated to the issuer by managers.
In addition to the exposures, MMC Industry and country analysis included in this report are weighted average4 loan price5, percentage below 90 and percentage below 80 buckets for each of their respective categories. We have also compared these values against the prior quarter and reported any quarter on quarter changes.
For Issuer exposure, we have analyzed some key metrics such as weighed average price (WAP), weighted average spread (WAS6) and the weighed average maturity (WAM7) for loans issued by the Top 30 Issuers in European CLOs.
Moody’s Most Common Industry Breakdown
European CLOs have the most exposure to the “Healthcare & Pharmaceuticals” (H&P) industry. The total exposure is at 18.21% across European CLOs, which is higher than the 15% industry concentration limits commonly seen in CLO deals. This higher average could be an indication of misreporting of this industry by certain managers.
Over the past three months, European CLO exposure to H&P has increased8 by 0.26% and the WAP for these loans have improved by 1.88 points. The percent of H&P loans priced under 90 is 8.50%, 2.89% of which is priced under 80.
We also observed an overall improvement in H&P loan prices in the last 3 months with 11.29% of the loans moving from <90 to >90 and 0.36% loans moving from >80 to <80 buckets.
Table 1: MMC Industries Ranked by Exposure
Issuer Country Breakdown
France is the top country exposure for European CLOs. Top five countries together represent 76.92% of the total exposure. We have combined exposures of the jurisdictions that are smaller under the “Miscellaneous” category noted at the end of the table.
Over the past three months, European CLO country exposure to France has decreased by 0.52% and the WAP for those loans improved by 2.07 points. The percent of French loans priced under 90 stands at 8.93%, of which 3.49% is priced under 80.
We also observed an overall improvement in these loan prices in the past three months with 11.55% of the loans moved from <90 to >90 and 0.67% loans moved from <80 to >80 buckets.
Table 2: Issuer Countries Ranked by Exposure
Top Loan Issuers of European CLO portfolios
Ineos Ltd is the largest issuer exposure in European CLOs within the “Chemicals, Plastics, & Rubber” MMC Industry.
The WAP for loans issued by Ineos Ltd is 97.80, and is 3.35 points higher compared to the WAP of the other loans from the same MMC Industry. Their WAS is 0.46% lower and WAM is 0.13 years higher compared to the other loans from the same MMC Industry.
Table 3: Top 30 Issuers by Exposure
Appendix
- An overview of the MMC industries for loans in US CLO portfolios is also available on Moody’s Analytics Structured Finance Portal. View here.
- View an overview of the state of US and Euro CLO reinvestment periods.
____________________________________________________________________________________________________________________________________________________________________
1 The Country is as reported for each loan exposure by trustees on their reports.
2 Issuers are the ultimate parent companies of the entity issuing the loan in each case. This also corresponds to data published by trustees.
3 The reports are the most recently published from 30/04/23 in the two months prior. If a data point is absent or corrupted the corresponding loan exposure is not included, this represents a small proportion of the overall exposure (under 0.03% of total balance for any given metric considered).
4 The weighted average is calculated using the current balance exposure to each loan.
5 The prices used are the most recent live figures from Markit as of the 30/04/23.
6 The WAS is calculated based on the spread of each loan exposure weighted by its current balance as of the 30/04/23.
7 The WAM is calculated based on the legal final maturity of each loan exposure weighted by its current balance as of the 30/04/23.
8 The current figures are as of 30/04/23, and the comparison is based on the figures as of 31/03/23 using the same methodology.
9 The following 19 countries/jurisdictions are combinedunder the Miscellaneous category:
Austria (Exp. 0.35%), Canada (Exp. 0.34%), Australia (Exp. 0.16%), Portugal(Exp. 0.14%), Malta (Exp. 0.13%), Italy (Exp. 0.1%), Singapore (Exp. 0.08%),Hong Kong SAR, China (Exp. 0.08%), Czech Republic (Exp. 0.06%), Slovenia (Exp.0.02%), Gibraltar (Exp. 0.01%), Bermuda (Exp. 0.01%), Lithuania (Exp. 0.01%),Hungary (Exp. 0.005%), Israel (Exp. 0.003%), British Virgin Islands (Exp.0.001%), Panama (Exp. 0.001%), Cayman Islands (Exp. 0.001%),