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96 U.S. reinvesting CLO ratings placed on CreditWatch negative; total CreditWatch negative count increases to 358

Tuesday, April 28, 2020
Opalesque Industry Update - S&P Global Ratings today placed its ratings on 96 classes from 92 reinvesting U.S. broadly syndicated loan collateralized loan obligation (BSL CLO) transactions on CreditWatch with negative implications. This continues our recent run of CreditWatch negative placements that commenced on March 20, 2020 .

The aggregate number of CLO ratings currently on CreditWatch with negative implications, including today's rating actions, is now at 358, which is about 8.6 % of our outstanding CLO ratings.

Today's CreditWatch negative placements continue to focus on our rated U.S. BSL CLOs that are in their reinvesting period.

Our review considered rating actions taken by our corporate ratings team and the increase in the underlying assets of these CLO portfolios that now fall under the 'CCC' category.

We specifically focused on the 'B' rated junior tranche of these reinvesting CLOs, which now have increased exposure to 'CCC' rated assets as they are the first of the rated notes that will be affected by any credit deterioration, increase in defaults, or any par loss arising from credit risk trades.

Following today's rating actions, nearly all of our 'B' ratings on reinvesting CLOs are on CreditWatch with negative implications. We also focused on some of the 'BB' rated notes of these reinvesting CLOs that now have a significant exposure to 'CCC' rated assets. As such, all of the affected CLO tranche ratings are in the 'BB' and 'B' rating categories. The percentage of 'BB' and 'B' ratings across all reinvesting and amortizing CLOs now under CreditWatch negative has increased to 32% and 80%, respectively after today's actions from 26% and 49% last week.

Our ratings (by rating category; as of this publication date) on individual tranches in U.S. cash flow CLO transactions, as well as the percentage of those currently on CreditWatch negative after today's rating actions.

S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak around midyear, and we are using this assumption in assessing the economic and credit implications.

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