Poh-Heng Tan from CLO Research provides insights on recent secondary trading activity in US BSL CLO double-B tranches, highlighting key pricing dynamics, market drivers, and deal-specific factors

As more CLO BB tranches move further beyond their reinvestment periods, secondary market dynamics have begun to reflect a wider divergence in performance and risk pricing.

An analysis of double-B bonds more than a year post-RP reveals a broad spectrum of discount margins, underscoring how structural seasoning, prepayment behavior, and deal-specific fundamentals are shaping valuation outcomes across the stack.

Based on SCI BWIC data, among the four bonds trading below par, the tightest, Ares 2018-47A, was priced below 600dm, while the widest, BLUEM 2015-3A, was above 900dm. Ares-managed deals with reinvestment periods ending in 2023 — nine in total — are typically called or reset within the first two years post-RP. Their average prepayment rate in year one after RP was around 26%, significantly higher than the median rate of 20% for deals with RP ending in 2023.

BLUEM 2015-3A has a weak MVOC of less than 102%, and the deal has a negative equity NAV, indicating it is unlikely to be called in the foreseeable future. Its wide DM reflects the elevated credit risk associated with the bond.

NBCLO 2016-1 and VOYA 2018-3 traded at similar DMs. While the former has a slightly lower MVOC, it benefits from a shorter WAL. Both bonds are expected to see elevated prepayment rates going forward.

NEUB 2013-14 and NEUB 2019-32 traded above par, supported by strong MVOCs, and their wider DMs reflect the associated call risk. NEUB bonds typically experience lower prepayment rates, particularly during the first two years post-RP. Given they are trading at a premium, a slower prepayment rate is actually advantageous. That said, NEUB 2013-14 is now entering its third year post-RP, making it much harder to maintain a low prepayment rate.

As shown in the table above, the three bonds from the 2019 vintage have recently concluded their reinvestment periods.

The range of their DMs largely reflects their respective MVOC levels, with APID 2019-32 showing the strongest MVOC — in the 106s — among them.

Next, looking at deals with reinvestment periods ending in 2026, the first three bonds have similar MVOC levels, with discount margins ranging from 713 to 774 DM. ANCHC 2020-15 traded at a noticeably wider DM, although the bond shows little convexity as it is already priced around par.

AIMCO 2021-15 had the tightest DM, reflecting the strongest MVOC among the five bonds. According to CLO Research’s manager rankings based on MVOC, Allstate has performed well across its deals.

The two bonds above have just under two years remaining in their reinvestment periods. OHALF 2015-1 has a solid MVOC of nearly 106, while WINDR 2021-4 shows a weaker MVOC of below 103. The latter traded close to 900 DM, reflecting the associated elevated credit risk. In contrast, OHALF 2015-1's relatively wide DM reflects call risk. OHA is one of the most prolific managers when it comes to resetting deals — unsurprising, given the manager’s strong performance.

RRAM 2025-37 traded at a relatively tight level—tighter than some primary reset deals such as OHA Credit Funding 14-R—despite the latter’s BB tranche having a higher MVOC in the 108s. That said, RRAM 2025-37 traded at a discount, making it more attractive to debt investors.

Three bonds with MVOCs in the 108s traded above par. The highest-priced bond, OAKC 2024-1, was priced at a tight 503 DM to call.

CEDF 2020-12 traded much wider than GLM 2022-12, largely due to its slightly longer WAL. Both deals have MVOCs in the 106s.

In a slightly volatile market, bonds trading above par may actually benefit, as the associated call risk is lower.