Sept. 01, 2021
This report does not constitute a rating action.
Nick W Kraemer, FRM New York +1-212-438-1698
Evan M Gunter New York + 1-212-438 6412
Jeff Sexton New York +1-212-438-3448
NEW YORK (S&P Global Ratings) Sept. 2, 2021--COVID-19 and the global recession in 2020 sparked the largest number of collateralized loan obligation (CLO) downgrades since the global financial crisis (GFC) more than 10 years ago, said S&P Global Ratings in its recently published study "2020 Annual Global Leveraged Loan CLO Default And Rating Transition Study."
With COVID-19 impacting credit quality globally, 10.6% of CLO ratings were lowered during the year, but just one CLO tranche defaulted in 2020, down from three in 2019.
However, ratings on most CLOs have withstood the economic and credit shock of the 2020 pandemic as nearly 90% of CLO ratings were unchanged.
"No CLOs rated 'AAA' at the start of 2020 were downgraded during the year," noted Nick Kramer, head of S&P Global Ratings Performance Analytics, adding that "rating downgrades were concentrated among junior tranches rated speculative grade at the start of the year."
The study also said the number of annual defaults declined for a fourth consecutive year, with just one CLO tranche defaulting in 2020, down from three in 2019.
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