CLO Equity Prices were relatively stable in March! Predicting a 2% - 5% drop in March NAVs. Should not negatively impact stock prices.

I reached out to several colleagues in the CLO industry this month to try to figure out how CLO equity performed in March. Most of the people I talked to thought the market had stabilized but there was not a lot activity in the secondary CLO Equity market. Just yesterday, I was able to talk to a close friend and he said that the CLO equity market is probably down 2% - 5%, which makes sense to me.

XFLT publishes a daily NAV and it was relatively flat for the month - only down 2.6% ($23.00 to the current NAV of $22.40). Only 35% of its portfolio is invested in CLO equity and roughly 50% in broadly syndicated loans so its NAV only provides a limited amount of insight into CLO equity pricing. However, as you can see in the chart below, leverage loan prices dipped at the end of March and have recover by roughly 1.25%. So, it makes sense that if XFLT's NAV is down 2.6% for the month and leverage loan pricing is up 1.25%, that CLO equity pricing is down a bit.

BKLN Invesco Senior Loan ETF

I believe that ECC and OXLC will report March NAV that are down roughly 5%, ECC $4.10 - $4.20 - OXLC $11.00 - $11.20. However, there are a number of other factors that impact these funds's NAVs other than movement in the underlying market value of its CLO equity portfolios so these figures are only my best estimate.

Projected March NAV

Since CLO equity funds stock prices are so beaten down, I don't think a small drop in March NAVs will negatively impact their stock prices. In fact, the market may see the relative stabilization of NAVs (after the double digit declines that occurred in November and February) as a positive and the stocks may jump a bit.

Good Luck!!!