NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the class A notes issued by Carlyle Global Market Strategies CLO 2012-1, Ltd. (CGMS CLO 2012-1) at 'AAAsf'. The Rating Outlook remains Stable.
KEY RATING DRIVERS
The affirmation of the class A notes is based on the stable performance of the underlying portfolio since the last review and the stable credit enhancement available to the notes. As of the Nov. 29, 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.
The loan portfolio par amount plus principal cash is approximately $499.1 million, compared to the balance at Fitch's previous review of $495.4 million, resulting in a slight increase in credit enhancement level for the class A notes. The minimum required weighted average spread (WAS) trigger is 4.1%, versus a current WAS of 4.4%, as reported by the trustee. No assets have defaulted in the portfolio and although the weighted average rating factor increased slightly, it still remains in the 'B/B-' range. The trustee currently reports the 'CCC' concentration at 1.2% of the portfolio versus a maximum allowance of 7.5%, based on S&P ratings. However, Fitch currently considers 8.5% of the collateral assets to be rated in the 'CCC' category versus 4.8% in the portfolio at last review, based on Fitch's Issuer Default Rating (IDR) Equivalency Map. Currently, 82.1% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher versus 86.3% previously.
The ratings of the notes may be sensitive to the following: asset defaults, portfolio migration, including assets being downgraded to 'CCC', portions of the portfolio being placed on Rating Watch Negative, OC or IC test breaches, or breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of CGMS CLO 2012-1, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities.
CGMS CLO 2012-1 is an arbitrage, cash flow collateralized loan obligation (CLO) that closed on March 27, 2012 and is managed by Carlyle Investment Management L.L.C. The transaction remains in its reinvestment period, which is scheduled to end in April 2016.
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. Given the stable performance of the deal since the last review in February 2013, no updated cash flow modeling was completed. The WAS, WAL, and PCM outputs are all in line with the levels at the previous review and as well as at closing. The current portfolio's 'AAAsf' Rating Default Rate (RDR) and Rating Recovery Rate (RRR) outputs from PCM are 47.8% and 38.9%, respectively, versus an RDR of 47.5% and RRR of 40.8% for the portfolio at last review.
The rating of the CGMS CLO 2012-1 notes is not expected to experience rating volatility in the near term, supporting its Stable Outlook.
Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on April 24, 2012. A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that asset class is also available by accessing the reports and links indicated below
Fitch has affirmed the following rating:
--$320,000,000 class A notes at 'AAAsf'; Outlook Stable.
Additional information is available at www.fitchratings.com.
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' (May 24, 2013);
--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2013);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 13, 2013).
Applicable Criteria and Related Research:
Counterparty Criteria for Structured Finance and Covered Bonds
Global Rating Criteria for Corporate CDOs
Global Structured Finance Rating Criteria