US CLO and ABL markets resilient

Dechert said in an August 5 note published by Mondaq that U.S. collateralized loan obligation and asset-based lending markets held up through the first half of 2026 despite tariff announcements, software-sector downgrades and conflict involving Iran. The law firm said issuance continued, refinancing windows stayed open and investor demand returned after an April slowdown. The note described a market that remained accessible, though with tighter pricing discipline and closer credit scrutiny. Separate regulatory developments in June and July also gave investors more clarity on capital treatment for some CLO holdings. ### How did the CLO market hold up when credit conditions turned volatile? Dechert said U.S. combined broadly syndicated loan and middle-market or private-credit CLO issuance totaled roughly $103.3 billion across 236 deals in the first quarter and $126.5 billion across 285 deals in the second quarter. That left first-half issuance at close to $230 billion, according to the August 5 note. (mondaq.com) April was the weak month. Dechert said issuance in April fell to about $26.7 billion as tariff shocks, downgrades and geopolitical tension hit at once, but managers that stepped back from new issuance in April were back pricing deals by mid-May, with some telling the firm reset demand was the strongest of the year. (mondaq.com) ### Where did asset-based lending fit into that resilience? Asset-based lending stayed relevant because it offered lenders collateral support at a time when cash-flow underwriting was facing more questions. Dechert grouped ABL with CLOs as part of a debt market that continued to function through the first half even as broader credit sentiment was tested by trade and geopolitical headlines. (mondaq.com) FTI Consulting said in its 2026 leveraged loan market survey that leveraged credit entered 2026 after two years of strong issuance and yield compression, but lenders were sounding a more cautious note as fundamentals became less supportive and refinancing still dominated new-issue activity. That backdrop helps explain why financing could remain available while underwriting standards tightened. (mondaq.com) ### Why did refinancing matter more than fresh risk-taking? Dechert said a large pool of deals was ready for refinancing and that improving spreads helped keep the market active. In practice, that meant borrowers with acceptable credits could still extend maturities, reset structures or reprice debt, even if terms were no longer as loose as in stronger markets. (fticonsulting.com) Moody’s said in its 2026 leveraged-finance outlook that refinancings were expected to remain elevated in the U.S. and EMEA even as M&A and leveraged buyout activity accelerated. That points to a market where debt investors were still willing to fund transactions, but often on terms shaped by credit quality and refinancing needs rather than broad risk appetite alone. (mondaq.com) ### What changed for buyout underwriting? Leverage availability did not remove pressure on operating performance. Dechert’s note said the market’s resilience meant financing was still there, but the burden in leveraged buyouts shifted back toward EBITDA growth, free-cash-flow conversion, debt paydown and entry discipline. (moodys.com) FTI Consulting said leveraged lenders entered 2026 with measured expectations and a recognition that the easiest returns had already been made since 2023. That left less room for aggressive assumptions and more focus on downside protection, especially for weaker speculative-grade borrowers. ### Did regulation help support demand for CLO paper? (mondaq.com) The National Association of Insurance Commissioners’ Risk-Based Capital Investment Risk and Evaluation Working Group voted on June 23 to adopt new life-insurer RBC factors for CLO investments. Mayer Brown said the changes, if approved by the NAIC bodies on June 30 and July 8, become effective with the December 31, 2026 RBC calculation. (fticonsulting.com) Mayer Brown said the June 23 action applied new factors not only to broadly syndicated loan CLOs but also to middle-market CLOs, collateralized debt obligations and collateralized bond obligations, while preserving a 45% factor for residual interests. Earlier in April, Dechert had said no changes were adopted at the NAIC spring meetings and that effectiveness was likely delayed to 2027, underscoring how quickly the regulatory picture moved in late June. (mayerbrown.com) December 31, 2026 is the next concrete milestone for insurers holding CLO exposure under the revised NAIC capital framework, while market participants head into the second half watching refinancing pipelines, spreads and new issuance volumes. (mondaq.com) (mayerbrown.com)