In an exclusive LFI interview, Robert Post, Managing Director and the Head of US CLOs for Blackstone Credit and Insurance (BXCI), shared views on the outlook for US BSL CLOs following the firm’s record year, with 35 US CLO deals printed (19 new-issue/16 repriced). Post explained that the loan and CLO markets are experiencing a period of rapid spread tightening, yet relative value remains attractive and the longer-term fundamental outlook remains constructive. CLO equity remains an attractive asset class, as tightening liabilities mitigate asset spread compression and the default environment should remain low.
The market is undergoing a repricing wave driven by strong technicals and high demand from CLOs and retail investors. This scenario allows borrowers to reprice, and Blackstone focuses on relative value and reducing risk through the sale of underperforming assets. The firm is strategically targeting refi/reset opportunities, especially in deals with high capital costs or nearing the end of their reinvestment period, expecting market growth this year with positive net new deal issuance.
Blackstone manages its open warehouses flexibly, adjusting the number based on current market conditions to capture unexpected volatility and move efficiently. This approach can involve maintaining a few open warehouses or as many as a dozen, depending on investors’ pipelines. Despite a traditional default rate of around 1% last year, Blackstone expects low traditional defaults this year with a few percentage points of shadow defaults.
LFI: What’s currently top of mind for CLOs, especially in relation to BSL CLOs?
Blackstone: Right now, we’re navigating a unique period where spreads are getting squeezed, yet the long-term outlook is constructive. We’ve seen significant tightening in loan spreads and CLO liabilities, particularly over the last six months…
