Fitch Affirms LCM X Limited Partnership

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the following two classes of LCM X Limited Partnership (LCM X):

--$259,000,000 class A notes at 'AAAsf'; Outlook Stable;

--$45,000,000 class B notes at 'AAsf'; Outlook Stable.

The affirmation is based on the stable performance of the underlying portfolio since the transaction's inception in February 2012. As of the Jan. 4, 2013 trustee report, the transaction continues to pass all of its coverage tests and collateral quality tests, and there have been no defaults in the underlying portfolio to date.

Fitch currently considers 3.7% of the collateral assets to be rated in the 'CCC' category, compared to 6.4% of the indicative portfolio at closing. The average credit quality of the portfolio is approximately 'B'. Second lien loans represent just 2.6% of the current portfolio according to the most recent trustee report, as compared to a permitted 10% bucket, with the remaining portfolio being invested in first priority senior secured loans. The portfolio par amount is approximately $400.7 million, compared to the initial target par balance of $400 million. The transaction remains in its reinvestment period, which is scheduled to end in April 2015.

This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various combinations of default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. The cash flow model was customized to reflect the transaction's structural features.

Fitch's portfolio and cash flow analysis demonstrated that the credit enhancement provided to the class A and class B notes remain consistent with the current rating levels. The class A and the class B notes are not expected to experience rating volatility in the near term, supporting the Stable Outlook on the notes.

LCM X is an arbitrage, cash flow collateralized loan obligation (CLO) that closed on Feb. 15, 2012 and is managed by LCM Asset Management LLC.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

The information used to assess these ratings was sourced from the periodic trustee reports, note valuation reports, and the public domain.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (June 6, 2012);

--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2012);

--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (March 20, 2012);

--'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=683910

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=673560

Counterparty Criteria for Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=678938

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