Egan-Jones Reports Slower CLO Issuance Amid Stable Credit Quality
Egan-Jones has analyzed the collateralized loan obligation (CLO) market and found that new issuance slowed in August due to compressed returns for equity investors, not deteriorating credit quality. U.S. CLO issuance dropped by 21% in count and 24% in volume compared to a year ago, with only $40.5 billion raised across 98 deals. The firm attributes the slowdown to tight loan spreads and limited new supply of syndicated loans rather than poor credit conditions. Credit quality for existing CLOs remained stable or improved slightly according to Egan-Jones' metrics. Key indicators like weighted average rating scores declined, signaling lower estimated default risk. Additionally, asset ratings below CCC+ held steady, while tranche coupons dipped modestly. The firm maintains a more positive outlook on CLO credit than other agencies due to its conservative modeling and monthly updates. Egan-Jones emphasizes that the slowdown in new issuance reflects economic challenges for assembling deals rather than weakness among existing ones.
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