Are CLO Collateral and Tranche Ratings Disconnected?

• 成果类型: Article
• 署名作者: Griffin, John M.; Nickerson, Jordan
• 署名单位: University of Texas System; University of Texas Austin; University of Washington; University of Washington Seattle
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhac078
• 发表日期: 2023
• 页码: 2319
• 关键词: credit ratings; CRISIS; yield

摘要

Between March and August 2020, S & P and Moody's downgraded approximately 25$\%$ of collateral feeding into CLOs and only 2$\%$ of tranche values, with rating actions concentrating in junior tranches. Both S & P and Moody's modeling indicate that the impacts should have been considerably larger, especially for higher-rated tranches. Neither changes in correlation nor the accumulation of pre-COVID-19 protective cushions can explain the downgrade asymmetry on upper tranches. Instead, CLO managers repositioned their collateral pools to dampen the negative credit shock and rating agencies incorporated qualitative adjustments in their CLO ratings. Important potential policy and market implications from these findings are discussed.