NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the class A notes issued by Symphony CLO IX Limited Partnership (Symphony IX) at 'AAAsf'. The Rating Outlook remains Stable.
KEY RATING DRIVERS
The rating affirmation on the class A notes is based on the stable performance of the underlying portfolio since the transaction's inception in May 2012 and the stable credit enhancement available to the notes. As of the March 12, 2014 trustee report, the transaction continues to pass all of its coverage tests and collateral quality tests.
The performing loan portfolio par amount plus principal cash is approximately $607.4 million, compared to the portfolio balance of $603.8 million from the last review in April 2013, resulting in a slight increase in credit enhancement levels for the class A notes. The weighted average rating factor of the portfolio remains at 'B/B-' and the portfolio is well diversified with 195 obligors. The trustee reports 1.2% 'CCC' assets versus a maximum allowance of 7.5%, based upon S&P ratings. Fitch currently considers 7.3% of the current collateral assets to be rated in the 'CCC' category, decreasing from 8.4% in the last review, based on Fitch's Issuer Default Rating (IDR) Equivalency Map. The portfolio is invested in 94% senior secured loans and 6% second lien loans, senior unsecured loans, and bonds. Additionally, approximately 80.8% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.
The Stable Outlook reflects the expectation that the credit quality of the portfolio will remain stable over the next one to two years.
The rating of the notes may be sensitive to the following: asset defaults, portfolio migration, including assets being downgraded to 'CCC', or portions of the portfolio being placed on Rating Watch Negative or being assigned a Negative Outlook, overcollateralization (OC) or interest coverage (IC) test breaches, breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of Symphony IX, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities.
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 closing in May 2012, there was no updated cash flow modeling completed. The weighted average spread (WAS), weighted average life (WAL), and PCM outputs are all in line with the levels at closing. The current portfolio's 'AAAsf' Rating Default Rate (RDR) and Rating Recovery Rate (RRR) outputs from PCM are 51.1% and 38.7% respectively, versus an RDR of 54.1% and RRR of 39.6% for the indicative portfolio at closing.
Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on June 5, 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.
Symphony is an arbitrage, cash flow collateralized loan obligation (CLO) that closed on May 8, 2012 and is managed by Symphony Asset Management LLC. The transaction remains in its reinvestment period, which is scheduled to end in April 2015.
Fitch has affirmed the following rating:
Symphony CLO IX Limited Partnership:
--Class A at 'AAAsf'; Outlook Stable.
Additional information is available at 'www.fitchratings.com'.
The information used to assess these ratings was sourced from 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);
--'Symphony CLO IX Limited Partnership New Issue Report' (June 5, 2012);
--'Symphony CLO IX Limited Partnership Representations and Warranties New Issue Appendix' (June 5, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Global Rating Criteria for Corporate CDOs
Counterparty Criteria for Structured Finance and Covered Bonds
Symphony CLO IX Limited Partnership
Symphony CLO IX Limited Partnership -- Appendix