NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned new ratings to the class A-R and B-R refinancing notes issued by LCM X Limited Partnership (LCM X).
KEY RATING DRIVERS
Fitch has been notified of proposed Second and Third Supplemental Indentures that would cause a refinancing of the outstanding notes and amend certain terms and definitions of the indenture, respectively. The collateral portfolio continues to display stable performance since the last review in January 2014 and credit enhancement levels will remain the same on the refinancing notes. On April 15, 2014, the issuer will issue refinancing notes as class A-R, B-R, C-R, D-R, and E-R and apply the net issuance and sales proceeds thereof to redeem the existing class A, B, C, D, and E notes at par (plus accrued interest), respectively. Each class of refinancing notes will be issued in the same amounts and have the same terms as the corresponding class of original notes, except that the spreads on all classes will be reduced. Since the reduced spreads on the liabilities is viewed as a credit positive and no other changes will be made to the capital structure or underlying portfolio as a result of the refinancing, a cash flow model analysis was not conducted for this review and Fitch has determined that the ratings on the refinancing notes shall be assigned at the same rating levels as the original notes.
RATING SENSITIVITIES
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, overcollateralization (OC) or interest coverage (IC) test breaches, or breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of LCM X, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities.
Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on April 9, 2012. In conjunction with the refinancing, certain provisions of the indenture have been amended by the Third Supplemental Indenture. The amendment addresses Volcker Rule concerns and will no longer allow for the investment of non-loan assets, such as senior secured notes and bonds, in the collateral portfolio. Maturity extensions of underlying assets are permitted as long as the extended maturity satisfies, or if not satisfied, maintains or improves the weighted average life test and is no later than the stated maturity of the notes. In addition, the new refinancing notes are restricted from being re-priced or refinanced again in the future. Fitch believes that the changed provisions from the Third Supplemental Indenture, including the ones noted above, will have no impact on the ratings of the refinancing notes.
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.
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.
Fitch has taken the following rating actions, effective April 15, 2014, on the following:
--$259,000,000 class A notes, 'PIF';
--$45,000,000 class B notes, 'PIF';
--$259,000,000 class A-R notes assigned 'AAAsf'; Outlook Stable;
--$45,000,000 class B-R notes assigned 'AAsf'; 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);
--'LCM X Limited Partnership New Issue Report' (April 9, 2012);
--'LCM X Limited Partnership -- Appendix' (April 9, 2012).
Applicable Criteria and Related Research:
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=715492
Counterparty Criteria for Structured Finance and Covered Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155
LCM X Limited Partnership
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=674971
LCM X Limited Partnership -- Appendix
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676053
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827107
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