Tight spreads in the traditional collateralized loan obligation (CLO) market continue unabated, which is prompting investors to anxiously await an increase in CLOs that invest in infrastructure-related loans and carry wider bond spreads and more attractive equity returns.
The new issuance volume of broadly-syndicated-loan (BSL) and middle-market CLOs through April dropped considerably over the same period last year, to $49.8 billion from $62.6 billion, according to
Despite that recent trend, infrastructure CLOs offer investors a potential opportunity for new CLO paper, while conferring diversification, more attractive returns, and relief from liability management exercises (LMEs), according to the bank.
An Eagle spots new ground
A few firms, including Clifford Capital, DWS and Starwood, have issued infrastructure CLOs for several years. A combination of economic, technological and political dynamics today are fueling what appears likely to be a swell in deals from new managers.
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The U.S. is going through its next industrial revolution ... the need for energy and other infrastructure has never been greater.
[driven by artificial intelligence], and, along with the Trump Administration's onshoring push, the need for energy and other infrastructure has never been greater," said Daniel Wohlberg, head of CLO issuance and origination at Eagle Point Credit Management.
In addition, he said, banks' insufficient capacity to meet the rapidly growing demand for infrastructure funding has left gaps for institutional investors to fill, especially for debt rated under single A.
A long-time investor in and manager of traditional CLOs investing in leveraged loans, Eagle Point is reportedly prepping what may be the first private-credit CLO investing in infrastructure loans that it plans to launch over the summer, according to reports. Other new entrants prepping infrastructure CLOs include private equity giant Blackstone and Rivage, a European independent manager of infrastructure debt.
Chamonix Partners Capital Management, a subsidiary of the Natixis global banking arm of France's Groupe BPCE, announced March 20 completing a $304 million infrastructure CLO that mostly pools emerging market infrastructure loans. And Barings, MassMutual's alternative asset manager, completed in February its first infrastructure CLO, Barings Infrastructure CLO Ltd. 2025-1. Its AAA bonds priced at SOFR plus 140 bps, or 15 basis points wide of the 10-day CLO AAA average, according to Octus, while its BBB portion priced at SOFR plus 290 bps, or 14.7 bps wide of the average.
Andrienne Butler, co-head of high-yield investments and head of U.S. CLOs at Barings, said infrastructure CLOs are comparable to traditional CLOs in terms of their capital structures, waterfall mechanics, and reinvestment and non-call periods. A key difference, she added, is the underlying collateral.
"Infrastructure debt is typically higher credit quality, with portfolios generally weighted toward the BB range, compared with the more single-B-oriented profiles you often see in traditional BSL CLOs," she said. She added that infrastructure loans have exhibited lower losses and higher recovery rates, historically.
They are also less susceptible to LMEs due to their more stable cash flows, stronger documentation, and lender protections than BSL loans.
The tradeoff, which helps fuel their bond premiums, is that more bespoke infrastructure loans tend to be less liquid and subject to tighter constraints around eligible subsectors, Butler said, and when the underlying loans are private, the ratings are based on credit estimates or private ratings.
Eagle Point's private-credit infrastructure CLO will bring to the infrastructure CLO market the bifurcation present in the traditional CLO market, according to reports. The asset manager reportedly will pool private infrastructure-related loans it originates directly, and the CLO bonds are likely to carry the premium associated with private credit.
Wohlberg declined to comment on the deal, but noted that "more broadly, this space is offering investors a differentiator, with better risk-adjusted returns.
He added that private-credit infrastructure CLOs are attractive to traditional CLO investors for the additional yield and diversity they offer, and to investors in typically less liquid infrastructure loans because they can trade in and out of the credits more easily.
