German corporate insolvencies in the small and medium sized business (SME) sectors are on the rise as predicted earlier this year (see ASR 4/22). In the face of this deteriorating situation, SME CLOs exhibit encouraging immunity to the side effects.
The consistent resilience demonstrated by these structures up against the most recent challenge - German Floods (see ASR 9/16) - was noted at the CDO conference in Berlin earlier this month. According to Dresdner Kleinwort Wasserstein, the rising insolvency figures reflect the increasingly difficult operating environment for German corporates, such as Kirchmedia and Philip Holzman, as well as companies in the SME sector. While most of the afflicted companies are largely from the west, it's likely that the recent floods will threaten companies in the east as well. Nonetheless, analysts expect the impact on SME CLOs to be limited.