Default levels among U.S. collateralized loan obligations issued before the financial crisis decreased marginally in the first month of the years, but are likely to creep higher, according to Moody's Investors Service. That's because many of these older CLOs have exposure to Texas Competitive Electric Holdings, an affiliate of Energy Future Holdings, which filed for bankruptcy on April 29. Moody's reported today that defaults of so-called CLO 1.0 decreased to 0.89% on Feb. 1 from 0.94% on Jan. 1. However, the credit rating agency expects these levels to change in coming months once trustee reports reflect CLOs' exposures to Texas Competitive Electric Holdings. As of May 1, roughly 165, or 26% of all U.S. CLOs that Moody's rates had some Texas Competitive exposure, including eight with 20% or more exposure. "Many CLO managers have elected to sell their Texas Competitive investment instead of holding it in anticipation of higher recoveries based on the outcome of the bankruptcy filing," the report stated.