CLOI - Loan Downgrades Are Coming But CLO BBs Remain Attractive
Summary
- While downgrades of loans to CCC could accelerate, we believe high-quality CLOs are well-positioned to absorb the additional CCC exposure.
- Regarding opportunities in CLO debt, while CLO BBs have outperformed high yield year-to-date on a total return basis, this has been driven by rate duration as opposed to credit-spread widening.
- Despite macro and loan downgrade concerns, we continue to be confident in the significant structural protection provided against credit losses in underlying loan portfolios.
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Loan Downgrades Are Coming, But CLO BBs Remain Attractive