Loan downgrades ‘biggest risk’ for CLOs in 2019

By David Bell
19 Nov 2018

Wells Fargo analysts said that the biggest risk for CLOs next year is loan rating downgrades straining the structures, although the bank does not expect an increase in loan defaults despite the rise of late cycle lending behaviour.

The growth of the riskiest segment of corporate credit in recent years could cause a bigger problem for the CLO market in the next credit downturn than in the last recession, wrote Wells Fargo CLO analysts on Monday.

The proportion of the loan market rated B/B- has grown ...

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