By the Numbers

CLO warehouses keep cycling out of the old and into the new

| October 20, 2023

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 whittle down the share of facilities financing aged portfolios and raise the share financing new. Four warehouses closed in September to issue new CLOs while 14 new warehouse lines opened, according to warehouse administrator US Bank. Tightening spreads on CLO debt have allowed the exit of aged portfolios and encouraged the launching of new. The 81 warehouses under US Bank administration suggest a steady pipeline of potential deals.

As CLO new-issue spreads across the capital stack have dropped from wide levels in the fourth quarter of 2022, warehouses opened for more than nine months have dropped from 57 in January to 39 in the latest reporting period. And of the aged warehouses, seven reportedly have evergreen terms, perhaps creating incentives for the loan portfolios to stay in the warehouse longer than usual rather than exit through a CLO deal.  Aged warehouses now represent 48% of total warehouses under US Bank administration, the lowest share in the last year (Exhibit 1).

Exhibit 1: Aged warehouses have dropped to the lowest share of the last year

Notes: Warehouse data are shown by their 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 and are warehouses administrated by US Bank only.  US Bank is estimated to have a 40% -50% market share as a warehouse administrator.
Source: US Bank, Santander US Capital Markets LLC.

Echoing the trend in the warehouse market, managers have stayed active in the primary market.  About 100 managers have issued at least one new CLO year-to-date, exceeding the number in the same period of 2022 and close to the 7-year average (Exhibit 2).  The smaller new issue size this year may have contributed to the lower total issuance volume, but the CLO primary market remains resilient.

Exhibit 2: CLO managers have stayed active in the primary market

Notes: Managers include both broadly syndicated loan CLO managers and middle market loan CLO managers.  Data as of Oct 11, 2023.
Data source: LCD, Santander US Capital Markets LLC

Caroline Chen
caroline.chen@santander.us
1 (646) 776-7809

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