Fitch Affirms LCM IX Limited Partnership

NEW YORK--()--Fitch Ratings has affirmed the class A notes issued by LCM IX Limited Partnership (LCM IX) at 'AAAsf'.

KEY RATING DRIVERS

The ratings affirmation reflects the stable performance of the underlying portfolio since the last review in April 2013 and the stable credit enhancement available to the notes. As of the April 3, 2014 trustee report, the transaction continues to pass all of its coverage tests.

The loan portfolio par amount plus principal cash is approximately $652.9 million, compared to the collateral balance of $653.4 million at the last review, causing the credit enhancement level to the class A notes to remain relatively unchanged. The average credit quality of the portfolio has remained unchanged at 'B+/B' since closing. Fitch currently considers 3.4% of the collateral assets to be rated in the 'CCC' category based on Fitch's Issuer Default Rating (IDR) Equivalency Map, compared to 3% at the last review. Second lien loans represent 1.7% of the current portfolio, as compared to a permitted 10% limitation, with the remaining portfolio being invested in first priority senior secured loans. The minimum required weighted average spread (WAS) trigger is 3.7%, versus a current WAS of 3.8%.

The Stable Outlook reflects Fitch's expectation that the class A note has sufficient level of credit protection to withstand potential deterioration in the credit quality of the portfolio, based on the results of Fitch's sensitivity analysis described below.

RATING SENSITIVITIES

The ratings 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 carrying a Negative Outlook, overcollaterization (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 LCM 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 and since the last review in April 2013, there was no updated cash flow modeling completed. The WAS, 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 43.7% and 42.3% respectively, versus an RDR of 46.8% and RRR of 42.5% for the indicative portfolio at closing.

Initial Key Rating Drivers and Rating Sensitivity are further described in the new issue report published on July 7, 2011, and available at www.fitchratings.com.

LCM IX is an arbitrage, cash flow collateralized loan obligation (CLO) that closed on June 22, 2011 and is managed by LCM Asset Management LLC. The transaction remains in its reinvestment period, which is scheduled to end in July 2014.

Fitch has affirmed the following rating:

LCM 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);
--'LCM IX Limited Partnership New Issue Report' (July 7, 2011).

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 IX Limited Partnership
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=642829

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827242
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:
Felix Chen, +1-212-908-9154
Associate Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst:
Felix Chen, +1-212-908-9154
Associate Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com