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Arbor – September 2024 CLO Update

Author: Published on: Published in: Arbor Realty Trust (NYSE:ABR)

September 19, 2024 –Despite rampant modifications across >70%% of its CLO book, Arbor’s loans remain deeply distressed. Substantially all investments underlying Arbor’s loan book are inherently unprofitable, as DSCR of investments continue to rapidly fall to 0.48x.

  • Federal rate cuts will not revitalize Arbor’s book. At its current spread: a rate cut of 200bps will only marginally reduce underlying investment losses, bringing underlying DSCR to a meagre 0.58x.
  • Arbor’s rapidly diminishing Net Interest Spread will not improve with any realistic federal rate cuts.
  • Arbor’s Cash Interest Income Rate has already fallen below the cost of debt, as its modifications allow distressed lenders to roll over interest on interest only loans.
  • Originations remain at all-time lows. Arbor, meanwhile, continues to pay dividends from the (few) principal repayments coming good from its loan book.

According to Bloomberg,  Arbor is under investigation by the DOJ and FBI. FOIA requests to the SEC were also denied on the basis that their release may interfere with enforcement proceedings.

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