NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to assign the following ratings to Apidos CLO XVII/LLC (Apidos CLO XVII):
--$2,500,000 Class X senior secured floating-rate notes, 'AAAsf'; Outlook Stable;
--$294,000,000 Class A-1A senior secured floating-rate notes, 'AAAsf'; Outlook Stable;
--$20,000,000 Class A-1B senior secured fixed-rate notes, 'AAAsf'; Outlook Stable.
Apidos CLO XVII (the issuer) and Apidos CLO XVII LLC (the co-issuer) represent an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by CVC Credit Partners, LLC (CVC Credit Partners). Net proceeds from the issuance of notes will be used to purchase a portfolio of approximately $500 million of leveraged loans. The CLO will have a four-year reinvestment period.
KEY RATING DRIVERS
Sufficient Credit Enhancement (CE): CE of 37.2% for class A-1A and A-1B notes (together, the class A-1 notes), in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE for class A-1 notes is in line with the average for recent CLO issuances. Class X notes are expected to be paid in full from the interest waterfall within 1.5 years of close.
'B/B-' Asset Quality: The average credit quality of the indicative portfolio is 'B/B-', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch Ratings' opinion, class X and A-1 notes are unlikely to be affected by the foreseeable level of defaults. The class X and A-1 notes are robust against default rates of up to 100% and 61.1%, respectively.
Strong Recovery Expectations: The indicative portfolio consists of 91.8% first lien senior secured loans, 82.5% of which have strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher. This is in line with the seniority profile of recent vintage CLOs.
Consistent Portfolio Parameters: The portfolio will be actively managed and bound by concentration limitations addressing various loan characteristics. The concentration limitations presented to date are within the range of limits set in the majority of recent CLOs. Fitch addressed the impact of the most prominent risk-presenting concentration allowances.
In addition to Fitch's stated criteria, the agency analyzed the structure's sensitivity to the potential variability of key model assumptions including decreases in weighted average spread or recovery rates and increases in default rates or correlation. The class X notes are expected to remain 'AAAsf' and the class A-1 notes are expected to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'Asf' and 'AAAsf' for the class A-1 notes.
The expected ratings are based on information provided to Fitch as of March 24, 2014. Sources of information used to assess these ratings were provided by the arranger, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the public domain. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.
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Additional information is available at 'www.fitchratings.com'.
Applicable Criteria & Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2013);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 23, 2014);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 13, 2013).
Applicable Criteria and Related Research: Apidos CLO XVII/LLC (US Structured Credit)
Counterparty Criteria for Structured Finance and Covered Bonds
Criteria for Interest Rate Stresses in Structured Finance Transactions
Global Rating Criteria for Corporate CDOs
Global Structured Finance Rating Criteria