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August 24, 2022
In this edition of the Lakemore Insights – June 2022 report, we consider the impact of the recent broad-based sell-off in global risk assets on CLO equity and leveraged loans. We discuss the attractiveness of print-and-sprint CLO transactions in this environment, given extremely attractive CLO equity arbitrage available in the secondary market – which is running at more than 40% in June. With BB rated leveraged loan prices now trading below 95, we see an attractive opportunity in the market. We analyze how current loan market fundamentals, like leverage and cashflow coverage, compare to previous crises and note that cashflow coverage for the leveraged loan market is at 3.8x (as of Q2 2022) – significantly above levels seen during or prior to previous recessionary periods.