Monitor portfolio · PCT-037 · Sourced card
CLO test what-if
Re-runs a CLO’s coverage and quality tests with the loans you pick downgraded or switched to PIK, and shows which test fails first.
Today vs automated
- Open the trustee reportAnalyst · manual
- Rebuild tests in ExcelAnalyst · manual, re-keying
- Edit ratings by handPM · manual
- Email / meeting hand-offAnalyst → PM
- A downgrade or PIK notice hits a portfolio loanTrigger: starts on its own
- Load the portfolioAutomated · Document store
- Apply downgrades and PIKAutomated · LLM
- Show test cushionsAI draft, human review · Monitoring model
- Trades and any request for consentApprove / override · PM
AutomatedAI draft, human reviewHuman onlyTools: Inbox / portal, Document store, LLM, Monitoring model, Loan system
Estimated valueestimate
100–860 analyst hours a year
$15k–$214k of time, vs an assumed $20k–$100k tool cost
Net: −$85k to $194k a year net of tool cost; at the low end of the assumptions it does not cover the tool cost.
Assumptions
- 3–6 analyst hours per scenario run today; 0.3–1 hours with an agent, including review
- 50–150 scenario runs a year for one team
- $150–250 per hour loaded cost
- Tool or build cost $20,000–100,000 a year (both)
Estimate, based on the assumptions shown; your numbers will differ. How we estimate
What else it can do for the team
- Rank which loans' downgrades hurt the most tests
- Test a proposed trade before execution
- Draft the monthly cushion note for investors
- Check the trustee's test math against your own
- Map loans in the portfolio to the issuer watchlist
How you get thereFour steps from prompting to an agentic workflow; most teams start at step 4.
Needs: an approved AI tool, a confidentiality policy.
Risk: unchecked answers, data pasted outside policy.
Needs: field definitions, a template, document parsing.
Risk: breaks silently when formats change.
Needs: inbox/doc-store access, system write-back, logging.
Risk: acting on a misread; needs review gates.
The automated lane above
Needs: shared data model, permissions, audit trail, exception queue.
Risk: errors compound across steps; needs monitoring.
Typical starting point
Solution optionsBuy, build or hybrid, with the trade-offs of each.
No vendor verified for this workflow in our directory yet.
Fastest start; you adapt to the product's data model and pricing.
An LLM API, a document parser, a vector or document store, your data warehouse, and a review queue.
Fits your definitions exactly; you own maintenance and controls.
Vendor extraction feeding your own checks, templates and systems.
Common middle path; two things to integrate and govern.
Listing is not endorsement.
What changes for the team3–6 h → 0.3–1 h per scenario run (estimate); coverage goes from a sample of borrowers, quarterly to every borrower, every delivery.
How it works
Full title: CLO compliance what-if: if these five loans drop to CCC, which OC test fails first?
“Five downgrades away from failing the Class D OC test. Here's the trade that fixes it, and the one that doesn't.”
Scenario
SAMPLE: a middle-market CLO manager hears three borrowers may be downgraded and two may PIK. Before the next determination date, the PM wants the effect on the CCC bucket, CCC excess haircut, OC and IC cushions, WARF and the interest diversion test.
What the human still decides
Trades and any request for consent. The agent computes tests; the PM and the trustee's report remain the record.
Why it matters
Morningstar DBRS reports the distressed share of its private credit ratings rose to 18% from 14% in a year, and middle-market CLO issuance hit a 2026 monthly high in September (Trepp). CCC buckets are where the stress lands.
What the record shows
Checked 2026-10-15.
Morningstar DBRS reports CCC (high) to C at 18% of its ~510 rated middle-market borrowers, up from 14% a year earlier. That is the bucket that drives CCC haircuts in OC tests. Middle-market CLO issuance hit a 2026 high of $6.8bn in September (Trepp), so new deals are ramping into a weaker CCC tail.
Try it: prompt and data
Using the indenture test definitions and the SAMPLE portfolio below, compute CCC %, CCC excess haircut, and each class's OC and IC ratio before and after this scenario: {downgrades/defaults}. Show the formula and indenture section for each test. Flag any test that fails. Do not propose trades unless asked.Data
Method shown on SAMPLE data. Real portfolios, trustee reports and data-room files are confidential: run on approved internal tools only, never paste into a public AI tool.
Who uses it, vendors and build
- Segments
- CLOs
- Who uses it
- CLO portfolio manager, CLO analyst, Warehouse lender
- Build
- Vendor + in-house
- In-house
- Deterministic test engine plus an LLM to read indenture definitions. Estimate: 3–5 weeks; test math must be reconciled to the trustee report every month.
- Last verified
- 2026-10-15
Vendors that claim this capability
- No vendor claim verified for this workflow yet.
Tags reflect each vendor's own public claims at the linked page (checked 2026-10-15). Not tested, ranked or endorsed.
Sources and related
Next step
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Not investment advice. Names marked SAMPLE are fictional. Found an error? See the corrections log.