S&P: Latest on Private Credit And Middle-Market CLOs

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HFA Staff
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Credit-Estimated Companies Under Stress

  • Credit estimate downgrades continued to dominate this quarter, driven by the impact of higher debt servicing costs on companies given the steep increase in benchmark rates.
  • We expect downgrades to continue, but the volume will likely begin to moderate given the resilience and sustained growth of the U.S. economy, some stabilization in inflation, clarity for now around the direction of policy rates, and efforts companies have taken to contain costs.

Strong CLO (Collateralized Loan Obligation) Issuance to Start the Year

  • Middle-market CLO issuance has been very robust this year, although it hasn’t (yet) reached the 35% of total U.S. CLO issuance that many in the market had been expecting late last year, largely because broadly syndicated loan (BSL) CLO issuance has been so strong.
  • As of April 15th, middle-market CLO issuance has been $10.49 billion across 21 transactions, up 51.4% over the same period last year.
  • Meanwhile, BSL CLO issuance is up 55.8% year over year, and middle-market CLOs have made up 18.3% of total issuance in 2024 so far.

First MM CLO Rating Lowered Since 2020

  • For the first time since 2020, there was a MM CLO rating downgrade in first-quarter 2024; on March 15, we lowered the rating on the class E notes from KCAP F3C Senior Funding LLC to ‘B+ (sf)’ from ‘BB- (sf)’ amidst heightened obligor concentration in the portfolio, increased exposure to ‘CCC’ and ‘D’ rated collateral, and par losses.


Orla O’Brien

Director, S&P Global Ratings Communications

S&P Global Ratings

C: 857.407.8559



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