Unending pain in CLO land
Rating firms and analysts have been lowering high yield default forecasts in recent months, but there’s still plenty of pain in store for the banks, insurers (and taxpayers) who own collateralised loan obligations, funds that package leveraged debt.
Here are some cheery stats from Fitch Ratings, which is busy setting about downgrading more European CLOs.
The average cumulative default rate for European CLOs is now 5.8 percent, double the rate in February this year. During that time there have been fifteen defaults, affecting 26 separate CLO funds, Fitch says. Some lucky CLO funds were exposed to as many as five of those fifteen defaults.
Some of the bonds Fitch may downgrade are already firmly in junk territory, though others are still rated as high as single A.