The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Majewski: CLO AAA and AA securities have zero historical impairments
“There's never been an impairment in the history of the CLO market on a AAA or AA security issued.”
Majewski: 96% of pre-crisis CLO equity returned positive with 15% median IRR
“96% of CLOs had a positive return to the equity class from before the financial crisis with a median of 15 IRR, outperforming private equity, outperforming the S&P 500 even.”
Majewski: Long-term default rate on BB CLO debt is under 20 bps annually
“In my opinion, you take very little credit risk buying CLO debt, even at the double B level, the class just above the equity, the longterm default rate is less than 20 basis points per annum.”
Majewski: CLO collateral managers cannot be removed absent gross negligence
“Absent capital C cause gross negligence, you can't remove a collateral manager. You can always sell your security. By and large, the vast majority of CLOs Have these ironclad contracts, which in a private equity fund or a hedge fund would not be tolerated.”
Majewski: J.P. Morgan held $10B+ in market value CLOs in 2002
“Now, at the time, the bank had over ten billion dollars of exposure to these investments. The bank's market cap was only around thirty billion dollars at the lows in 2002.”
Tom Majewski: CLO opacity means investors need to be in the club
“CLOs are not reported on trace, for example. So it's a little more of an opaque market where you need to be in the club to be able to really outperform.”
Majewski: BDC debt outperformed BDC equity on an index basis from 2014 to 2019
“BDC debt outperformed BDC equity from 20 14 to 20 19. Even though there weren't a lot of credit problems then, just the yield opportunity was so great, it outperformed on an index basis the equity.”
Majewski: 12% of loans paid off at par annually in 2008–2009
“And even in 2008 and nine, on average, 12% of loans paid off at par each year.”
Majewski: Leveraged loan index delivered positive returns in 28 of 30 years
“The Credit Suisse Leverage Loan Index is sort of the S&P 500 of the loan market, and it's had a positive return for 28 of the last 30 years.”
Majewski: US CLO market size is $750B to $800B
“If there's probably 750 to eight hundred billion of CLOs outstanding in the United States right now”
Majewski: Eagle Point will see a down 10%+ month in five years
“In the next five years, we're going to have a down 10% plus month. I don't know when. I don't know why. I know it's going to happen, and if that's not something you're comfortable with, this is probably not the right investment for you.”