By the Numbers
The share of aged CLO warehouses holds at 55%
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 CLO warehouse market continues to cut its risks. The number of warehouses administered by US Bank dropped to 80 in June, down from 88 at the beginning of the year. Warehouse closures have exceeded openings in most months as managers show progress in clearing out older warehouses. Warehouse managers also have reduced exposure to healthcare, which has seen rising defaults and downgrades, while increasing their exposure to energy. And managers have maintained steady diversification, with the Top Five industry concentration holding around 31% this year.
The overhang of older CLO warehouses continues to clear. Warehouses outstanding for more than nine months fell by three to 44 in the July reporting period but remained at 55% of all warehouses administered by US Bank (Exhibit 1). The opening of new warehouses slowed in June, contributing to the drop in the share of warehouses opened for less than three months to 20%. Historically, US bank has administered about half of the market’s outstanding CLO warehouses.
Exhibit 1: The share of aged warehouses was unchanged during the month
Note: Warehouse data are shown for the reporting month, reflecting activity in the prior month. Data include both broadly syndicated loans and middle market loan CLO warehouses. A few warehouses in the 270D+ bucket may have evergreen terms. Share is calculated by the count of warehouses in each age category. Data reflect warehouse lines administrated by US Bank only. Source: US Bank, Santander US Capital Markets LLC
Overall, recent warehouse activity has shown a healthier picture. The decline of outstanding warehouses may imply a lower new issue supply going forward and bring technical support to CLO spreads.
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