Contents

CLOs

CLO issuance slows, but hopes for late-year rebound remain

Market participants agree that low levels of M&A activity and limited loan supply will suppress CLO new issuance not only for the rest of this quarter but also throughout the remainder of 2025

Recently, JP Morgan revised its forecast for US and European CLO issuance, adjusting it from US$180bn to US$150bn. In April, European CLO new issuance totaled US$1.19bn, compared to US$4.91bn for the same period in 2024, according to data from SCI.

“The volatility we've experienced over the last month will likely affect the market for a period of one to three months, until there is an adjustment and or a reaction. We obviously need to get through the summer first, but we could potentially lose two months, or even just one as markets could be quicker to react than we think,” Scott McMunn, CEO at LMA, tells SCI.

McMunn points out that low levels of CLO new issuance is possible during this time, although he remained uncertain on whether this will last for one month or three months.

“We will likely see a decline due to the volatility and the lack of new CLO  issuance. However, if the arbitrage opportunities are favorable and the market corrects itself, there is a possibility for a rebound, leading to CLO issuance levels exceeding our monthly expectations as we approach the end of the year,” he says.

Source: SCI

The market generally does not expect 2025 to be a record year, in contrast with the levels seen in 2021 and 2022.

Fitch revised its default forecasts, with an increase for Europe of 50bps to 2.5% while the US nearly doubled to 5.5% for the full year 2025.

Matthias Neugebauer, EMEA head of CLOs and structured credit at Fitch Ratings observes that while the US is facing stress, Europe has experienced low growth for the past decade, with the European Central Bank expected to cut several times in 2025 due to low growth and inflation. Neugebauer also mentioned that current inflationary policies suggest few rate cuts is the US.

Cautious outlook for new issuance and M&A activity

The European trend observed in 2024—marked by limited new money and buyout loans but ongoing repricing activity—has carried into 2025. Recent market volatility appears to have tempered banks’ willingness to underwrite risk, which may further reduce the supply of new loans as lenders grow more cautious.

McMunn points out that current fluctuations and a lower risk appetite suggest that M&A activity is unlikely to surge. With the summer months approaching, he emphasises on the limited time to stabilise the markets for significant issuances in the coming weeks.

This subdued outlook is reinforced by Jeanine Arnold, senior vice-president of leveraged finance EMEA at Moody’s Ratings. While Arnold anticipated some M&A activity to happen, the resurgence that was expected at the beginning of the year is unlikely to materialise.

“The macroeconomic environment – she says - poses a greater risk to smaller, PE-owned companies, as they have fewer levers to manage deteriorations in GDP or increased spreads if refinancing becomes necessary. Tariffs will have less of a direct impact on leveraged finance companies, as they tend to be local regional players with limited exposure to imports and exports.”

Arnold also points out that many issuers took advantage of multiple repricing waves last year, effectively pushing out their maturity walls. This has reduced the immediate need for new loan issuance.

“The widening of spreads is affecting loan issuance, especially for opportunistic financing. In the past couple of weeks, we've mostly seen high yield issuance, but there have been some loan issuances coming to market too. The good news is that spreads seem to be tightening again, which is promising for loan issuance. Plus, the support of the CLO machine will be key to keeping loan issuance going,” she adds.

ETF and securitised product strategy 

Looking at broader credit trends, John Kerschner, head of US securitised products at Janus Henderson Investors, notes that the opportunity to take on lower-rated credit is more limited than some might expect, given today’s macro environment.

He emphasises that the current US administration has unique priorities and advocates for a balanced approach to risk while favoring higher-quality securitised products due to the rarity of triple-A ratings in corporate credit.

“The current US administration operates quite differently from past ones and has three main priorities, which they believe reflect a mandate from the last election. We shouldn't adopt a complete risk-off approach. This is why we favor higher-quality securitised products, as triple-A ratings are rare in corporate credit. With inflation potentially rising from 2.5% to around 3.5% to 4%, it impacts interest rates,” he says.

Looking ahead

Despite dropping levels of CLO new issuance observed in the last month, market participants remain overall optimistic for the second quarter and the rest of the year.

“We expect CLO performance to remain positive in Q2 in line with Q1. The majority of EMEA CLO transactions are now in amortisation phase and have been deleveraging leading to upgrade rating actions mainly at the investment grade level, with other notes being affirmed," states Ian Perrin, associate md at Moody’s Ratings Structured Finance Group.

"With the recent events and spread widening, the pace of deleveraging will probably slow down a bit as we expect repricing activity to reduce. Also if loan prices remain affected, the ability of CLO managers to sell loans to redeem existing transactions might be impacted. Overall, current events could lead to idiosyncratic defaults and put downward pressure on CLO notes, but we expect this to be limited to some class F notes (those rated at single-B level),” he adds.

Camilla Vitanza

CLOs

CLO BWICs show wide IRR spread despite strong distributions

Poh-Heng Tan from CLO Research provides BWIC highlights on majority CLO equity traded

Last week’s BWIC lists included four majority equity trades according to SCI BWIC data, with cover bids ranging from the single digits to the high 40s. These levels implied an average equity IRR of around 6.6% for primary investors, assuming an issue price of US$95. The trades comprised two 2017 vintage deals, one from 2018, and one from 2022.

PUTNM 2022-1A delivered a 22.2% annual distribution, driven by a substantial excess par payout in August 2024 following its reset. The principal-to-interest reallocation boosted inception-to-date annual distribution but led to a decline in equity NAV post-reset. Despite the strong equity cashflow, the primary equity IRR was modest at ~5.4%, due to the low equity cover bid offsetting cumulative distribution gains. This underscores that annual distribution is only one part of the IRR picture.

BLUEM 2018-22A SUB received a cover bid of 8.21. The deal exited its reinvestment period in July 2023 and is marginally breaching its Class E OC test. At this level, the estimated primary equity IRR is around 5.8%, placing it in the lowest quartile among 2018 vintage equity tranches traded via BWIC since July 2024.

CIFC 2017-1A SUB received a cover bid of 35H. Combined with its low inception-to-date annual distribution, partly due to cumulative Class X payments exceeding $5 million, the primary equity IRR was 5.6%, around the median for 2017 vintage equity tranches traded since July 2024.

OCP 2017-13A SUB received a cover bid of 32H. Despite Onex Credit Partners’ below-average interest return strategy, the deal achieved a mid-teens inception-to-date annual distribution due to its low funding cost. With a primary equity IRR of 9.8%, it ranks in the top 30% among 2017 vintage equity tranches traded since July 2024.

Asset-Backed Finance

Private credit eyes master trust potential

ABF convergence continues as securitisation tools tipped for evergreen funds

Capital Relief Trades

Preplaced flow

Preplaced flow

ABS

Pawn loan ABS debuts

Malaysia's Ta Yoong behind innovative, revolving MTN programme

Malaysian pawnbroking group Ta Yoong is sponsoring the country’s debut pawn loan securitisation. The transaction consists of an initial RM200m tranche of senior MTNs and RM31m of junior MTNs (retained by the sponsor), issued under the RM500m TY Consolidated Capital MTN programme. RAM Ratings has assigned a preliminary triple-A rating to the senior notes.

Founded in 1947, Ta Yoong is in the process of institutionalising its business with professionals for long-term continuity. Currently owning and operating 15 pawnshops in Klang Valley, the group has consistently demonstrated healthy disbursements and earnings, despite intense competition from both conventional and Ar-Rahnu (Islamic) pawnbroking operators, according to RAM Ratings. During 2024, Ta Yoong disbursed about 410,000 pawn loans amounting to RM854m. 

The proceeds of the first tranche of MTNs will be used to fund the purchase of RM231m of eligible receivables at closing, prefund liquidity reserves and defray issuance expenses. While Ta Yoong accepts various valuables as collateral, this transaction involves only pawn loans backed by gold, originated via nine of its pawnshops. 

The rating of the senior MTNs is supported by an overcollateralisation (OC) ratio of 15.50%, providing adequate credit support commensurate with the triple-A stressed rating scenario. The cashflow analysis factors in a 5% base case default rate with a 4.50x stress multiple, LTV ratio of 90% for the pawn loans, as well as a 40% stress decline in gold price. RAM notes that its assumptions are primarily based on the group’s historical data on delinquency, early settlement and recovery involving 104 static pools originated between January 2016 and August 2024.

The quality of pawn loans originated is highly dependent on the competency of the collateral assessors. Further, recovery from pawned items is subject to the volatility of gold prices. Hence, RAM will monitor and review its stress assumptions, particularly at times of potential sustained volatility or a sharp drop in gold prices. 

Given the short-tail of pawn loans, which have maximum regulated tenors of six months, the transaction structure includes a revolving feature that allows the issuer to use net monthly collections to acquire additional receivables, provided that eligible criteria and conditions are met. The revolving period (RP) will run for 48 months from the issue date before entering a controlled amortisation period of 12 months, during which the issuer will cease further purchases and cash collections will be used to meet ongoing obligations and redeem outstanding MTN on the maturity date. The issuer must maintain a minimum OC level of 15.50% throughout the RP and if any junior MTN coupons are paid.

To mitigate portfolio performance deterioration, the transaction will enter a rapid amortisation period (RAP) upon the occurrence of certain events, such as a three-month moving average (MA) default rate of above 3% or a two-month MA collection rate of below 90%. During the RAP, the issuer will cease further purchases and excess collections (after meeting ongoing obligations) will be used to amortise outstanding senior MTNs on a monthly basis. The transaction structure will also enter a RAP if OC (without cash balances) falls below 10% for two consecutive months.

Structured Finance

Why visuals win: SCI's new dashboard makes structured credit data instantly actionable

SCI has launched a new dashboard allowing subscribers to view and manipulate its extensive historical data spanning multiple securitisation asset classes.

It takes the human brain just 13 milliseconds to process an image - significantly faster than parsing columns of raw figures. In the fast-paced world of structured credit, where every decision depends on digesting complex data quickly and confidently, this speed matters.

At SCI, we believe that data interpretation is the most critical aspect of market intelligence. That’s why we’ve built a powerful new dashboard that brings our proprietary database to life - transforming the way investors, traders and analysts interact with the structured credit universe.

Our interactive dashboard allows users to:

• Track deal issuance over time across SRTs, CLOs, ABS and other asset classes
• Visualise geographic trends and issuance hot spots
• Identify major players - by volume, frequency and deal type
• Explore asset class dynamics with clarity and confidence.

Whether you're pricing secondary market trades, evaluating new issuance or benchmarking across the market, this tool is designed to turn data into insight - instantly.

For a live walkthrough of the platform, schedule a demo with SCI’s Head of Account Management Anna Lepore.

Structured Finance

'Strong comeback' for European ABS market

Managers highlight mezz demand amid Liberation Day volatility

The European and UK ABS/MBS market was last month dominated by volatility from the US Liberation Day tariff announcements, which significantly disrupted global trade and financial markets. Monthly fund factsheets monitored by SCI suggest that asset managers are repositioning to mitigate losses from anticipated macroeconomic impacts and identifying where demand is now concentrated.

The wider macroeconomic issues tested market sentiment in April. As TwentyFour AM Momentum Bond Fund’s managers note: “Initially, the volatility that US President Donald Trump’s 2 April tariff announcement led primary markets to close.”

In response, some investors sold triple-A bonds to raise liquidity, which pushed spreads wider for riskier assets and reflected increased risk aversion.

Nevertheless, Amundi portfolio managers confirm in their April fund factsheet that - despite the initial market paralysis - the firm actively participated in a variety of successful ABS transactions across Europe. This ranged from auto loans in Germany to residential mortgages in the UK, demonstrating continued investor appetite amid the economic slowdown.

“All transactions experienced significant success, especially in mezzanine tranches, which remain heavily oversubscribed,” they note.

Mezzanine tranches became attractively priced during the disruption; a point echoed by TwentyFour’s managers stating: “Mezzanine discussions for primary mortgage transactions were 30-50bp wide of pre-tariff levels.”

However, spreads were quick to recover with support from bank treasury demand. Aegon’s portfolio managers highlight such resilience: “Demand however did not fade…spreads remained stable and tightened towards the last two weeks of April.”

Senior tranches outperformed

The firm notes that the primary market made a strong comeback, with resumed issuance ultimately being oversubscribed. Senior tranches outperformed amid spread widening, supported by stronger fundamentals and lower arrears.

Amundi reports a -0.12% return for its ABS Responsible Fund in April. The firm cites its continued avoidance of CMBS due to structural concerns, explaining: “The relatively high spread levels offered on these products do not justify the concentration of credit risk, the added complexity… and the relatively lower liquidity.”

It maintained elevated levels of credit protection, signalling a more defensive stance than its peers.

Meanwhile, Aegon provided quantitative context to the market slowdown, noting that issuance in April amounted to €8bn, 50% lower than the same period last year.

Despite recent turbulence, all three asset managers are cautiously optimistic as they move into the second half of 2025. Aegon maintains a measured outlook, noting: “Carry will be the most important driver of returns and is meanwhile providing downside protection.”

The firm remains focused on generating stable income through carry, with careful security selection to manage credit dispersion.

Similarly, TwentyFour is positioning for selective opportunities in the ABS and CLO markets, particularly in mezzanine tranches. While spreads have partially recovered since the tariff shock, the team remains cautious and emphasises the need for flexibility and liquidity as volatility is expected to persist.

Finally, Amundi sees room for recovery and yield generation in European ABS. The temporary pause on tariffs has helped restore investor confidence and the firm says it is navigating the uncertain environment through selective positioning and disciplined risk management.

Fund specifics:

Amundi ABS returned -0.12% in April 2025. YTD: 0.77%
Fund size: €1.09bn. ABS/MBS allocation: 93.82%

Aegon European ABS Fund returned +0.14% in April 2025. YTD: 0.89%
Fund size: €7.67bn ABS/MBS allocation: 75.9%

TwentyFour AM Monument Fund returned -0.25% in April 2025. YTD: 1.23%
Fund size: £1.93bn. ABS/MBS allocation: 46.24%

Janus Henderson ABS Fund returned +0.79% in April 2025. YTD: 1.38%
Fund size: £495.66m. ABS/MBS allocation: 53.01%

Matthew Manders

Asset-Backed Finance

Fitch faces backlash from KBRA over use of retracted NAIC data

Dispute sparks debate over ratings credibility in booming private credit market

KBRA has publicly criticised rival agency Fitch Ratings for publishing a report on Monday that leaned on a dataset the National Association of Insurance Commissioners (NAIC) had discredited and withdrawn in August 2024. The NAIC’s Securities Valuation Office (SVO) pulled its report due to a flawed methodology as it was based on a sample of just 109 securities out of 8,152 – too limited, KBRA argues, to justify Fitch’s claim that smaller agencies inflate ratings.

In a statement published yesterday, KBRA accused Fitch of either a “lack of due diligence” or a “nefarious effort to fabricate a competitive narrative with no regard for accuracy” by publishing analysis based on the withdrawn data. Moreover, KBRA’s statement argues that Fitch’s report undermines trust in rating agencies and risks destabilising a "rapidly growing but still nascent" private credit market.

When asked to comment on the matter, Fitch responded: “Our report was written based on NAIC data and reporting released not only in 2024, but studies published in 2022 reaching similar conclusions. If the NAIC provides new information, we will update our analysis.”

Although the NAIC has yet to issue a revised version of the findings, it is moving to tighten oversight on private credit ratings. Starting January 2026, the NAIC’s SVO will have the authority to contest ratings that differ from its assessments by three or more notches. The move, whose proposal was approved in August 2024, aims to target concerns over ratings shopping and ensure more accurate capital charges for US insurers.

The dispute arrives at a time when investor trust in ratings is key, especially among insurers, who increasingly rely on privately rated credit assessments.

Marta Canini

Capital Relief Trades

JPM has brought auto loan private CRT

Prolific US CRT issuer appears on radar screen

It has emerged that JP Morgan completed a private, bilateral CRT deal on auto loans in March, according to well-placed sources.

The reference pool was USD3.5bn, and it was priced to yield 715bp over SOFR, they add.

It was, apparently, not a first loss position, so a portion of the lower end of the exposure looks to have been retained.

The identity of the buyer has not been divulged.

There is also talk of a recent synthetic securitization of a US$5bn corporate loan pool, but the identity of the bank, on this occasion, is not known.

In general, however, the US CRT market is currently becalmed and there have been few deals of note since the last month’s Third Coast Bank/EJF deal.

Simon Boughey

Capital Relief Trades

Forced buyer

Increasingly crowded SRT market should experience natural rotation in investor base

With (consistently) increasing demand a shaping factor of the SRT market, investors could possibly revise their approach and trade selection process. In fact, hearsay suggests that the SRT market might be bifurcating, with on one side the (very) syndicated and programmatic processes and on the other, one where banks are looking to solve something other than regulatory capital relief (i.e. finding limit relief or reducing single-name concentration on some of their biggest exposures). Such shift in approach – also abridged as transactional vs. relationship-based – highlights varying perspectives within the SRT investor base.

In the case of TwentyFour Asset Management (TwentyFour), SRTs sit within a deeper strategy of relative value, forming part of a portfolio blend of CLOs, forward-flows and additional securitisation assets. Such vision is in line with TwentyFour’s launch of  a new asset-backed finance (ABF) fund.

Commenting on recent market developments, Pauline Quirin portfolio manager at TwentyFour, describes a “forced buyer” phenomenon, notably for single-strategy funds. She notes: “One of the biggest challenges with a single-strategy SRT fund is that you are forced buyer. So when spreads are at 650bps, you are left with little choice. Comparatively, our approach is more opportunistic in this space but uses it to achieve diversification into assets we are not able to acquire outright.”

Historically, SRTs have also tended to offer compelling relative value versus other private debt products, delivering spreads in the region of 7-11% over cash. However, Quirin notes that spreads in SRT tightened by 200-300bp across 2024 as growing investor demand added to a general risk-on sentiment across credit markets. We also see SRT as an area with lower barriers to entry.

She adds: “New investors (in this space) naturally came to gain access to extremely granular loan portfolios with relatively high yields. A lot of capital was raised in this quest for yield and I think there is still a lot of cash on the sideline. Therefore, regarding spreads it appears that we are at a trigger point.”

Quirin additionally notes that she has not noticed a clear or pronounced widening in SRT spreads so far this year. However she points to the public ABS market as to illustrate the current spread and demand dynamic, giving Santander’s recent SC Germany Consumer 2025-1 as an example:

“While the broader German performance has been below par, and particularly on this platform (consumer lender), the mezzanine were still 6-8x oversubscribed. This clearly indicates that investors are still cash-heavy.”

Quirin argues that, in this context, TwentyFour’s overall strategy and allocations allows for more flexibility and the ability to truly pick and choose transactions.

Looking ahead Quirin does expect spreads to widen at some point in the year and consequently, for the SRT relative value to improve again in 2025. However, if such trend were not to occur, Quirin still expects the market to stabilise. She concludes:

“I feel we will see more rotation in the investor base. If spreads do not widen, investors such as hedge funds can typically also invest in other asset classes. Therefore naturally, such rotation can also lead to a widening in spreads.”

Vincent Nadeau

RMBS

TAMI 2 marks new phase for UK ERM securitisations

Issuance of MA-compliant RMBS expected to rise in 2H25 as regulations evolve

The UK’s equity release mortgage (ERM) securitisation market is gaining traction, with the latest deal - TAMI Senior Securitisation 2 - marking a new phase and a repeatable model for Matching Adjustment (MA)-compliant structures. Following the blueprint set by its predecessor, LMF1, TAMI 2 reflects growing institutional appetite and regulatory momentum ahead of an expected uptick in ERM securitisation issuance in 2H25.

"We’re seeing a strong pipeline of ERM securitisations for the rest of 2025,” says Ashley Thomas, head of structured finance at ARC Ratings. “LMF1 and TAMI 2 have shown that the market now has working, repeatable structures that meet market requirements. This opens the door for more originators and asset managers to securitise ERM-backed books."

Earlier this week, ARC assigned final public long-term ratings to all seven classes of notes issued by TAMI 2 - a £319.1m static cash RMBS backed by a pool of ERMs originated between 2001 and 2024 by More2Life, OneFamily and Lloyds Bank.

TAMI 2 was structured to deliver fixed, scheduled principal and interest payments, aligning with Solvency 2 requirements for insurers. The deal features robust credit enhancement through multiple reserve funds and credit subordination, with liquidity supported by a fully funded £5m senior reserve fund and a growing reserve fund target of £19.6m. Despite inherent market and cashflow timing risks, ARC found the transaction resilient under stress scenarios, supporting the assigned ratings.

"Our methodology evaluates both voluntary prepayments and involuntary redemptions, primarily mortality and morbidity. For a portfolio with such a long tail, we place particular emphasis on life expectancy trends, property valuation indexing and controls against property dilapidation," explains Thomas.

While ARC previously rated a private version of the deal, TAMI 2’s move to a public transaction reflects growing demand for transparency and secondary liquidity.

"Many market participants have commented on how public ratings enhance liquidity and appeal to a wider investor base, especially insurers seeking MA-eligible assets with predictable cashflows," notes Thomas. "Now that the precedent is set, I would be surprised if future deals didn’t go public."

While the PRA’s proposed MA Investment Accelerator (MAIA) - currently under consultation - may allow firms to include MA-eligible assets in portfolios before full regulatory approval, ARC believes the market does not need to wait for further legislative support. “Structures like TAMI 2 demonstrate there is already a viable model for MA-aligned securitisations today,” says Thomas.

However, if approved, the MAIA framework is expected to go live in 4Q25, following the consultation deadline on June 4. 

“ERM securitisation is one of the most exciting areas of structured finance right now,” says Thomas. “It’s a space to watch closely in 2025 and beyond.”

Marta Canini

Structured Finance

Job swaps weekly: LGT names leadership team for European CLO platform

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees LGT Capital Partners making senior appointments to support the launch of dedicated European CLO management platform Legato. Elsewhere, Reed Smith has hired a new partner to serve as head of its Asia-Pacific corporate trust and agency practice, while Ogier has recruited a counsel in its Luxembourg-based banking and finance team. 

LGT Capital Partners has launched Legato, a dedicated platform for managing European CLOs, having recently recruited Ilina Chen as portfolio manager. The firm has been investing in CLOs for more than a decade, as a limited partner and as a direct investor in the asset class. It will now build on this expertise by managing its own European CLO portfolios, utilising existing internal capital allocations and institutional third-party investment. 

Based in London, Chen was previously md - deputy head of CLO management at Sculptor Capital Management, which she joined in June 2015. Before that, she worked at Ares Management and NatWest. 

Chen will co-manage Legato with Thomas Kyriakoudis, partner and co-head of private credit solutions at LGT, supported by a growing team of analysts. The firm has mandated Deutsche Bank for the placement of its inaugural CLO transaction, Legato 1. 

Meanwhile, Reed Smith has recruited Tim Beech as partner and head of its Asia-Pacific corporate trust and agency practice, based in the Singapore office. He advises corporate trustees and agents on all aspects of debt capital markets and loan transactions, including regulatory capital, securitisation, infrastructure and project finance transactions. 

Beech was previously joint managing partner, Singapore, and head of the Asia-Pacific corporate trust and agency practice at A&O Shearman. He joined Allen & Overy in London as a paralegal in July 2002 and relocated to Singapore in April 2017, having been promoted to counsel and head of the firm’s Asia-Pacific corporate trust and agency practice. 

Ogier has appointed Laura Archange as counsel in its Luxembourg-based banking and finance team. With more than a decade of experience in Luxembourg law, her practice focuses on securitisation and fund finance and she has particular expertise in sustainable finance. Archange was previously counsel at Arendt & Medernach, having joined the firm in August 2012. 

Holding Redlich has recruited construction and structured finance specialist, Jonathon Usher, to partner in its latest recruitment round. Usher will be based in the national firm’s Brisbane office, and joins after 13-years serving as director at his own firm, Usher Levi. Prior to this, held roles at Corrs Chambers Westgarth, Akin Gump and DLA Piper. 

Newmark has added a new md, Nina Russo, to its debt and structured finance practice. Russo will be based between the firm’s offices in Atlanta and New York, and will lead originating and structuring opportunities across the US as well as drive efforts to expand the firm’s presence in the Southeast region. She will report directly to co-heads of global debt and structured finance, Jordan Rosechlaub and Jonathon Firestone, and joins the team from Meridian Capital where she was vp of debt and equity capital markets. 

And finally, CBRE has recruited Matthew Pizzolato to join its structured finance team in New Jersey. Pizzolato brings more than a decade of CRE finance experience to his new role as senior vp, as the firm builds out its presence in the region. He joins CBRE from Accordia where he served as head of acquisitions. 

Corinne Smith, Claudia Lewis