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Arbor – April CLO Update

April 17, 2024 – Arbor’s underlying CLO performance data for April is now live. 37 of Arbor’s CLO loans are nlow delinquent, representing 11% of its CLO book.To superficially achieve this remarkable “rehabilitation” feat: Arbor has modified 56 loans in the past month.

These modifications substantially comprise of capitalization of interest, “temporary” rate reductions, forbearance agreements, maturity extensions and/or a combination of the same. In total: Arbor have modified loans of 81 properties in 2024 alone.

  • The weighted DSCR of modified loans is ~55%, about 500bps lower than the average CLO weighted DSCR.
  • The nature of many extended loans are various, high leverage loans secured against the same assets.
  • Adjusting for this: the LTV of loans modified in 2024 ranges between ~60% to 121%, with the average at about 85%.
  • We reiterate that the LTV denominator, being the values of the properties, is ludicrous. The LTV is vastly understated.
  • We note that the cap rate of underlying assets whose loans were modified in 2024 is ~3.9% against a 10 year T-bill rate of 4.62%.

There is no rate cut large enough, no rate caps cheap enough, and no investors dumb enough to save Arbor.