Fitch to Rate WhiteHorse VIII, Ltd./LLC.; Presale Issued

CHICAGO--()--Fitch Ratings expects to assign the following ratings to WhiteHorse VIII, Ltd./LLC (WhiteHorse VIII):

--$4,000,000 class X notes 'AAAsf'; Outlook Stable;

--$341,000,000 class A notes 'AAAsf'; Outlook Stable.

TRANSACTION SUMMARY

WhiteHorse VIII, Ltd. and WhiteHorse VIII, LLC (together, WhiteHorse VIII, or the issuer) is an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by H.I.G. WhiteHorse Capital, LLC (H.I.G. WhiteHorse). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of $550 million of primarily leveraged loans. The CLO will have a four-year reinvestment period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 38% for class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in an 'AAAsf' stress scenario. Class X notes are ultimately expected to be paid in full from the application of interest proceeds via the interest waterfall.

'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 a highly speculative credit quality; however, class X and A notes are unlikely to be affected by the foreseeable level of defaults. Class X and A notes display robust projected performance against default rates of up to 81.6% and 61.2%, respectively.

Strong Recovery Expectations: The indicative portfolio consists of 96.2% first lien senior secured loans, 92.9% of which have strong recovery prospects or a Recovery Rating of 'RR2' or higher by Fitch Ratings. 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 and collateral quality tests addressing various loan and structural characteristics. The concentration limitations and collateral quality test levels presented to date are within the range of limits set in the majority of recent CLOs. Fitch assessed the impact of the most prominent risk-presenting concentration allowances and targeted test levels in its analysis.

RATING SENSITIVITIES

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. Fitch expects the class X and A notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'AA+sf' and 'AAAsf' for class X notes and 'Asf' and 'AAAsf' for class A notes.

The expected ratings are based on information provided to Fitch as of April 14, 2014. Sources of information used to assess these ratings were provided by the arranger, Morgan Stanley & Co. LLC, and the public domain. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.

The presale report is available to investors on Fitch's web site at www.fitchratings.com. For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'webmaster@fitchratings.com'.

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: WhiteHorse VIII, Ltd./LLC

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744681

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Global Rating Criteria for Corporate CDOs

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

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695535

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826888

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Aaron Hughes, +1 312-368-2074
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Cristina Feracota, +1 312-606-2300
Associate Director
or
Committee Chairperson
Derek Miller, +1 312-368-2076
Senior Director
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Aaron Hughes, +1 312-368-2074
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Cristina Feracota, +1 312-606-2300
Associate Director
or
Committee Chairperson
Derek Miller, +1 312-368-2076
Senior Director
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com