Regulatory shifts, credibility concerns and ESG issues: The changing face of CLO valuations

08 March 2022

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Creditflux is pleased to present Regulatory shifts, credibility concerns and ESG issues: The changing face of CLO valuations, published in association with PricingDirect.

Based on a survey of 150 senior CLO market participants, the report shows that even as the impact of the pandemic continued to work its way through the global economy, managers remained optimistic about the future of CLOs, considering them to be a vital tool in their efforts to extend maturities and lower their cost of financing.

This optimistic outlook does not mean the CLO market is without challenges going forward, however. These challenges include the changing nature of regulatory requirements and how CLO managers incorporate ESG criteria to potentially attract new sources of capital and secure more favorable pricing.

Key findings from the report include:

  • 67% of respondents believe that CLOs have weathered the economic headwinds caused by the COVID-19 pandemic remarkably well.
  • 64% say they expect to increase their 2022 CLO allocations on 2021 levels, rising to 68% among European respondents.
  • 55% cite increasing regulatory requirements as one of the top two risks/challenges facing CLO managers and investors, followed by the greater prevalence of second lien and cov-lite loans, as well as liquidity and volatility risk (29% for both).