Fitch: U.S. CLOs Feeling Effects of Commodities Fallout

NEW YORK--()--The ongoing struggles in the commodities sectors are showing their adverse effects on U.S. CLO performance, according to Fitch Ratings in its latest U.S. CLO index.

The number of CLOs reporting defaults more than doubled in the third quarter to 41 from 19 in the second quarter. With the ongoing stress in commodity-related sectors, the exposure to distressed and defaulted loans is likely to increase in the future. Alpha Natural Resources led the largest default exposures by notional amounts held in CLOs. Other names contributing to the higher defaults include Samson Investment Company, Sabine Oil & Gas, Patriot Coal, Walter Energy, and Arch Coal.

The report features the timing of sales of these defaulted names across CLOs in the Index. Some collateral managers were able to exit or pair down their positions with a minimum loss, while others realized steeper losses. Yet, some managers never sold these defaulted names.

In addition to defaults in commodity-related sectors, recent defaults included MMM Holdings, Millennium Health, Medical Card System, Targus Group International, and Edmentum, as reported by CLO's trustees. Variability in CLOs' definition of defaults becomes more apparent, as more issuers enter a distressed territory. For example, while 18 CLOs held Arch Coal at the end of the quarter, only six reported its loans as defaulted.

The report also highlights the index's largest exposures to loans trading below 80% of par and CLOs with the biggest share of combined exposure to defaulted loans and Fitch's loans of concern.

Fitch's U.S. Leveraged Loan and CLO Index is enhanced by its Excel-based Tracker Data File, which allows investors to drill down into the data presented in the report. The Index Report is part of Fitch's series of structured finance index reports. The index reports are updated quarterly and are available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at www.fitchratings.com.

U.S. CLO Index : Small Cracks Appear in Performance

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872946

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Contacts

Fitch Ratings
Alina Pak, CFA
Senior Director
+1-312-368-3184
Fitch Ratings, Inc.,
70 West Madison Street
Chicago, IL 60602
or
Christine Choo
Director
+1 212-908-0603
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Alina Pak, CFA
Senior Director
+1-312-368-3184
Fitch Ratings, Inc.,
70 West Madison Street
Chicago, IL 60602
or
Christine Choo
Director
+1 212-908-0603
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com