European CLO market continues to perform well

While issuance levels might continue to be lower than expected, the European CLO market continues to perform well according to Fitch. It has been two years since it downgraded a European CLO rating and the underlying numbers suggest this trend will continue.

Also, within Fitch-rated European CLOs, CCC and default exposure are low at 2.5% and 0.5% respectively, as compared to 3% and 0.2% a year ago. Also within Fitch-rated European CLOs, the percentage of assets on Negative Outlook decreased from 15.9% to 14.6% in April 2023.

Last week there were two European CLOs priced, with Margay CLO I being brought to market by M&G Investments, in its first issuance since 2008. Signal Harmonic CLO I was the debut issuance from Signal Capital. It was a €286 million CLO with a two-year non-Call and four-year reinvestment period. For that deal, AAAs were wider than the recent averages at Euribor+2.10. The issuer will retain the F tranche of this transaction and it may be sold in the future.

Volta Finance Ltd (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.

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