Global CLO 2023 Outlook
Troubled waters for 2023: CLOs’ resilience will be put to the test again
A panel of Moody’s CLO and leverage loan experts discussed the prospect of US and European collateralized loan obligations (CLOs) in 2023. Leveraged loan performance will weaken as the macroeconomic environment worsens. Meanwhile, CLO managers have been bracing for a downturn, repositioning portfolios, and adding new structural features aimed at providing the necessary flexibility to maneuver through the turn of the cycle.
The panel discussed the impact on CLOs and the effectiveness of these measures, some of which are untested and could harbor risks. Other challenges and opportunities await, including aging CLOs, lower asset recoveries, interest rate volatility, and a LIBOR logjam.
Key Topics:
- With a looming downturn and deteriorating credit conditions, will leveraged loan downgrades continue and what will be the impact on CLOs?
- How will CLO managers react to a credit downturn? What new strategies will come into play? How will some CLOs’ new, untested capabilities fare?
- What other challenges or opportunities, including aging CLOs, lower asset recoveries, interest rate volatility, LIBOR logjam, and ESG, await CLOs?
Research Reports:
Most junior notes' ability to weather a severe credit downturn has weakened since pandemic
CLO Manager Trends H2 2022: Portfolio Metrics and Rated Volume
Shrinking collateral quality test cushions portend challenges to trading flexibility
SOFR transition can skew WAS calculation for some CLOs
After entrenchment of ESG investment criteria, deals still maintain diversity and credit quality
Asset risk and documentation features converging among US and European CLOs
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SpeakersMizuho Tanaka Vice President – Senior Analyst, Structured Finance Group Moody's Investors Service
Christina Padgett Associate Managing Director, Corporate Finance Moody's Ratings
Al Remeza Associate Managing Director, SFG/CLOs & Structured Credit Moody's Investors Service
Ramon Torres Senior Vice President/Manager, SFG/CLOs & Structured Credit Moody's Investors Service
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Mizuho Tanaka is a Vice President – Senior Analyst in the Structured Finance Group and is based in London. Mizuho joined Moody’s in 2005 and has been working primarily in the surveillance team, specialising in European CLOs. She has also been the lead analyst for various types of primary transactions including esoteric CDOs and repacks.
Mizuho holds a MSci in Medical Physics and a PhD in Theoretical Molecular Physics, both from University College London.
Christina Padgett is an Associate Managing Director in Moody’s Corporate Finance Group and leads the Leveraged Finance Research and Analytics team and Private Credit research. She spearheads in-depth, cross-team research on credit trends in the leveraged finance market and private equity. Christina also remains very focused on facilitating global private credit research. She brings an established multi-cycle expertise in credit markets to her research role, which is regularly informed by meetings with investors, regulators, alternative asset managers, bankers, media and others. In addition, as rating chair for speculative grade rating committees, she participates in key credit discussions spanning a broad range of industries within Moody’s rated universe.
Before joining Moody’s, Christina was a vice president at JPMorgan Chase in the Mergers and Acquisitions Group. Prior to her investment banking role, Christina completed the bank’s Credit Training program and worked in Europe Corporate Finance and Credit Audit. She received a Master in International Political Economy from Columbia University, School of International and Public Affairs and a B.A. in History from William Smith College.
Al Remeza is an Associate Managing Director and Head of the CLO and Structured Credit new rating team with Moody's Investors Service. He is also the managing editor for Moody’s CLO Interest newsletter.
Prior to joining Moody’s, he was a Senior Consultant at one of Mercer’s financial advisory consulting groups. His clients were financial institutions such as major investment banks, reinsurance, and insurance companies, energy and commodities trading firms, quasi-government agencies, and numerous other Fortune 500 firms.
His other experiences include working for Credit Suisse First Boston and Alliance Capital. He earned an MA in Economics, a BS in Economics, and a BS in Engineering and did his doctoral work in finance while at the Wharton School of the University of Pennsylvania
Ramon is a manager in the U.S. Structured Credit Surveillance team with product responsibility primarily for U.S.-rated CLOs and SME CLOs. Ramon joined Moody’s U.S. Structured Finance group in 1999, initially as an analyst focused on CBO and CLO ratings. Since 2009, Ramon has been a manager of the team monitoring ratings on CLOs and other structured credit products. Ramon is a key contributor to Moody’s CLO ratings and methodology research, including as co-author of Moody’s global CLO rating methodology.
Prior to joining Moody’s Ramon worked overseas as a manager and senior transactor at an Asian universal bank, with responsibilities in IPO underwriting, corporate finance, securitization, financial advisory, and merchant banking. Before that, he also worked at Citicorp Real Estate focused on commercial real estate-related debt restructurings and workouts.
Ramon received his MBA degree, majors in finance and marketing, from Northwestern University’s J.L. Kellogg Graduate School of Management. He also holds a Bachelor of Science degree in mathematics, major in computer science, from Ateneo de Manila University