The Credit Edge by Bloomberg Intelligence CLOs Are Tough to Blow Up, Crescent Says
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Oct 2, 2025 John Fekete, head of tradable credit at Crescent Capital Group, shares insights from his extensive experience in corporate credit. He discusses the resilience of collateralized loan obligations (CLOs), especially those backed by middle-market borrowers, and why they're tough to disrupt. John highlights the current climate of manageable leverage, the growth of private credit, and emerging opportunities in healthcare and services sectors. He also explores the impact of recent interest rate cuts on borrowers, emphasizing the importance of smart manager selection in preserving CLO value.
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Macro Health Hidden Behind Anecdotes
- Leverage and upcoming maturities suggest the broader credit market is healthier than headlines imply.
- High-yield leverage is near 20-year lows and three years of refinancing can cover upcoming maturities.
Quality Shift Between Loans And Bonds
- Loan market growth and private credit issuance have raised overall credit quality in high yield.
- High yield now has a BB average rating while loans sit around single B, changing relative risk dynamics.
Defaults Are Idiosyncratic So Far
- Current default activity remains modest and mostly idiosyncratic, not systemic.
- Elevated defaults reflect sector pockets and the lagged effect of 2022 rate hikes, not a broad collapse.