CLO finance reports highlight that Q2 performance metrics show increasing weighted average spreads in BB tranches, offering attractive relative value compared to direct loan investments. Market opportunities appear favorable for tactical allocations. “The key element, or the connective tissue we need to produce net new issuance, is M&A,” said Tal Reback, global investment strategist at KKR & Co.’s credit and markets business. “There is pent-up demand and fleeting opportunities to go to market. But there is a pipeline in the works.” Note that the first 12-24 months of the reinvestment phase are assigned the “non-call” period. Once the non-call period has expired, the debt tranches within the structure can be refinanced, reset, or redeemed in their entirety, depending on the prevailing economic conditions. This is discussed in more detail in the following section. CLO finance managers are observing reduced loan downgrades in the latest S&P data, improving credit enhancement levels across tranches. This credit stability is feeding into greater issuance confidence heading toward the fall.