Arbor – December 2024 CLO Update

Author: Viceroy Research Published on: December 20, 2024 Published in: Arbor Realty Trust (NYSE:ABR)

December 20, 2024 – Arbor’s December surveillance report fully captures 75bps of rate cuts and how these rate cuts have not improved Arbor’s borrowers’ ability to service loans.

Arbor has modified $4.7b of loans and holds $814m of delinquent loans.
- Modified loans represent ~80% of Arbor’s ~$6b CLO portfolio, and delinquent loans ~15%.
- The DSCR of modified loans now fully captures 75bps of rate cuts, and only sits slightly above ~0.60x.
- Borrowers appear to have taken outside debt to service Arbor interest, reflected in substantially higher debt servicing costs than Arbor scheduled interest expenses.
Although the value of delinquencies has not increased, delinquency length by value has increased showing these loans are not being cured.
Arbor’s rapidly diminishing Net Interest Spread will not improve with any realistic federal rate cuts.
A cursory view of interest spreads continues to show that borrowers are paying Arbor in apparent discretionary cash sweeps. No modifications or delinquencies are recorded.

Arbor’s December surveillance report fully captures 75bps of rate cuts and how these rate cuts have not improved Arbor’s borrowers’ ability to service loans.

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