Top CLO Issuers See Increased Distress Levels

CRED iQ‘s research team revisited our quarterly commercial real estate collateralized loan obligation (CLO) rankings, which explored aggregated data by issuer to uncover opportunities and risks within this closely watched sector.  

With updated remittance data as of July 31, CRED iQ evaluated the top 20 CRE CLO issuers and their performance. Our aim was to understand the percentage breakdown of delinquency and overall distress within these major CRE CLO issuers’ portfolios, and then measure the scale of those portfolios and their associated rankings within the group. We also wanted to explore the percentage of loans that were modified by each issuer.  

Some core measures of our study included the current outstanding deal balance, CRE CLO distress rates, modification rates, delinquencies, loans sent to the special servicer, and loans added to the servicer watch list.  

CRED iQ data shows that 10 of the 20 CLO issuers saw increased levels of overall distress, (including Fortress, Ready Capital, Varde Partners, Argentic, Starwood (STWD) and MF1) while another eight (including Greystone, Harbor Group, FS Rialto, Acre, TPG and Prime) saw reduced distress percentages. Another two issuers remained flat over the period (Blackstone and KKR). 

Fortress secured the top spot with 36.6 percent of their loans in distress. They also had the least amount of loans outstanding for the 20 largest issuers. Rounding out the top three, Granite Pointe and Ready Capital came in at second and third place with 29.8 percent and 27.5 percent, respectively. From a ranking perspective, Harbor Group saw the most favorable movement (down) while Argentic moved up more slots than the other issuers.  

Focusing in on delinquency, 31.3 percent of Fortress’ loans were delinquent — notching the number one slot in this category as well. Granite Pointe was not far behind at 28 percent and Varde Partners came in a more distant third with 18.4 percent of their loans being reported as delinquent.  

The top six issuers based upon outstanding deal balances did not change over the reporting period. MF1 remains in the top spot, followed by Arbor, FS Rialto, Benefit Street Partners, Ready Capital and Bridge Investment Group.  

For this analysis, we also wanted to explore the percentages of loans that were modified. In this category KKR dominated the group with a whopping 75.2 percent of its loans modified. Second and third place was a virtual tie between Arbor and Granite Pointe with 60.4 percent and 60.3 percent, respectively.  

Mike Haas is the founder and CEO of CRED iQ