CLO outlook improves

Key indices for the CLO market showed signs of stabilisation as WARF (weighted average rating factors) and over-collateralisation levels improved slightly in the month of June, buoyed by rising loan prices. OC levels continued to improve (See chart 1). A key factor has been rising loan prices, including those for Caa-rated and defaulted instruments. Reinvestments have also modestly helped OC levels as some managers purchased assets at a discount, but avoided triggering deep-discount haircuts.