By the Numbers
A market update to the CLO warehouses
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.
The share of CLO warehouses aged nine months or more stayed relatively flat at 64% in March, according to US Bank. Despite market volatility and banking turmoil, the monthly pace of new warehouse openings has been consistent since June. The number of warehouses closed for CLOs each month exceeded the number of new warehouses in most periods. And CLO managers have kept up their efforts to spread out risk.
The market may also need to keep an eye on warehouses provided by Credit Suisse. Year-to-date, Credit Suisse has led the underwriting of two new deals in the US including KKR 2023-46 and Whitebox 2023-4A. Credit Suisse has led the underwriting of 31 CLO managers’ deals in the last three years, including some frequent issuers that may indicate a warehouse relationship (Exhibit 1). A European CLO warehouse line provided by Credit Suisse to Carlyle recently terminated, according to Bloomberg, and loans subsequently liquidated.
Exhibit 1: Credit Suisse underwrote many CLO managers’ deals
Note: table above only lists managers with Credit Suisse underwritten deals over $1 billion in the past three years. Numbers reflect the dollar amount of the deal size at closing.
Source: PitchBook LCD, Santander US Capital Markets LLC.
The share of warehouses by outstanding age were stable in the month
In March, warehouses outstanding for more than nine months fell by one to 56. The number of warehouses open for less than three months and those open between three and nine months remained steady (Exhibit 2). Historically, US Bank has administered roughly half of the market’s outstanding CLO warehouses.
Exhibit 2: The share of warehouses by age had little change during the month
Note: Warehouse data are shown for the reporting month, reflecting activity in the prior month. Share is calculated by the count of warehouse in each age category. Data reflect warehouse lines administrated by US Bank only.
Source: US Bank, Santander US Capital Markets LLC
Warehouses closed for CLOs have outnumbered new warehouses
The number of outstanding warehouses has fallen from 112 in June to 87 in March, down 22% and consistent with the resilient issuance in the primary market. (Exhibit 3).
Exhibit 3: Total warehouses outstanding have dropped to below 90 this year
Note: Warehouse data are shown for the reporting month, reflecting activity in the prior month. Data reflect warehouse lines administrated by US Bank only.
Source: US Bank, Santander US Capital Markets LLC
The average par balance in warehouses increased in March
The average par balance in warehouses rose to above $170 million in March, driven by a 23% increase in warehouses open for less than nine months (Exhibit 4). In contrast, the average par balance in aged warehouses remained stable. The rise of the average par balance in younger warehouses may reflect a surge in CLO managers’ purchase activity to take advantage of recent loan price weakness.
Exhibit 4: The average traded par in warehouses increased over the month
Note: Warehouse data are shown for the reporting month, reflecting activity in the prior month. Data reflect warehouse lines administrated by US Bank only.
Source: US Bank, Santander US Capital Markets LLC
CLO managers’ diversification efforts continue
The largest five industry sectors’ exposure in CLO warehouses declined over the last year from 38% to 31.6%. CLO managers’ allocation to the energy sector has recently risen to 5.3%. Healthcare exposure, on the other hand, has declined from 7.2% to 4.6% in a year (Exhibit 5). Exposure to technology services has dropped out of the Top Five in recent months.
Exhibit 5: Top five industry sectors in warehouses have been lowered to 31%
Note: Percentage represents the aggregate loan par balance in one industry over the total par balance in all outstanding warehouses. Industry concentration in each individual warehouse may vary. Warehouse data is shown for the reporting month, reflecting activity in the prior month. Data reflects warehouse lines administrated by US Bank only.
Source: US Bank, Santander US Capital Markets LLC
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