Downgrades to energy companies' credit ratings are weighing on CLO funds' portfolios, in another hit to a market already facing a drop of more than 50% in issuance this year. The credit quality of CLO assets is deteriorating, according to a report by Standard & Poor's, which has downgraded 45 energy borrowers this month as oil prices remain around all-time lows. The credit ratings of about 1.4% of assets held by US CLOs have been downgraded or placed on creditwatch with negative implications this year. CLO volume is already forecast to more than halve to US$45bn this year due to market volatility and impending regulation that will force firms to hold 5% of their deals.
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