CLO equity pricing is up about 10% since early March lows. ECC’s April NAV should be up over 5% - $4.40

On Monday and Tuesday, I attended the Dealcatalyst/LSTA CLO conference in NYC.  It was great to run into so many of my friends and fellow CLO geeks.  This is the first of several articles I intend to write about what was discussed at the conference.  Some of the other topics I plan to write about:

My friend Carlos Maymi

AI Software fears – overblown?

Captive CLO Equity Funds – good for the leverage loan and CLO markets?  I am not sure of the answer but there was a huge divergence in opinions.  Needless to say the CLO managers that have them love them

Liquidity in the CLO Debt Markets – How does the growth in AAA and other ETFs impact the market.  Should CLO debt ETF investors fear a period of rapid withdrawal from these funds?

With this article I am going to discuss CLO equity pricing.  One of the most compelling topics was the recent disruption in the leverage loan markets, which, according to the panelists, has presented an unexpected opportunity for CLO managers. The consensus was that these market disturbances enabled managers to improve their CLOs’ weighted average spreads (WAS), ultimately strengthening the performance and resilience of their portfolios.

This improvement in weighted average spreads is particularly significant for CLO equity investors. Panelists noted that equity pricing has seen a nascent recovery from the yearlong free fall in pricing.  A senior CLO trader noted that CLO equity pricing is approximately 10% above the lows observed in early March 2026. With broader market dynamics shifting, managers are leveraging the volatility to optimize their structures, resulting in more attractive returns for equity holders.

Specifically, two CLO Managers noted that in the early part of 2026, their portfolios were overweight in higher rated loans (BBs).  I guess the theory was that if investors are not being paid for risk, they would rather hold a solid BB credit yielding around S+250 instead of B loan yielding a little over S+300bps.  Both managers said that once the loan market backed up in early March due to the Iran war and the fear of AI software implosion, they took advantage and sold some of the BBs at par and bought strong B rated loans that were trading off.  By doing this, the Managers increase par and WAS.

For CLO equity pricing to continue to improve, the loan market must continue to provide managers with the ability to improve par and WAS.  In fact, I am a bit surprised that the leverage loan market has held up so well given the uncertainty in the economy.  As I have noted in a perverse way, CLO equity performs better when leverage loans are under some stress.  As we move further into 2026, I am hopeful that the recent uptick in CLO equity pricing continues.

With this insight, I am ready to publish my projected ECC April NAV – see below:

I am not sure if I will be as accurate as my projected March NAV ($4.16 v. $4.17) but I am confident that ECC’s NAV will be up in April.  With ECC’s stock trading just about at NAV, the increase in NAV should give the stock a solid boost.

BTW – I want to make sure my readers (all 20 of you) know that you can post comments and/or email me any questions or concerns. I want this site to be interactive.