CHICAGO--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to Pinnacle Park CLO, Ltd./LLC:
--$307,500,000 class A notes 'AAAsf'; Outlook Stable.
TRANSACTION SUMMARY
Pinnacle Park CLO, Ltd. (the issuer) and Pinnacle Park CLO, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by GSO/Blackstone Debt Funds Management LLC (GSO). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $500 million of primarily senior secured leveraged loans. The CLO will have a four-year reinvestment period and a two-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 38.5% for the class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAAsf' stress scenario. The degree of CE available to the class A notes is slightly higher than the average CE of recent CLO issuances.
'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, in Fitch's opinion, class A notes are unlikely to be affected by the foreseeable level of defaults. Class A notes are projected to be able to withstand default rates of up to 62.3%.
Strong Recovery Expectations: The indicative portfolio consists of 97.8% first lien senior secured loans. Approximately 92.4% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher.
Consistent Portfolio Parameters: The concentration limitations and collateral quality test levels 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 the Fitch stressed portfolio analysis.
RATING SENSITIVITIES
Fitch evaluated 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 A notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'A+sf' and 'AAAsf' for the class A notes.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available shortly to investors on Fitch's website 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.
The sources of information used to assess these ratings were the transaction documents provided by the arranger, Wells Fargo Securities, LLC, 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);
--'Criteria for Interest Rate
Stresses in Structured Finance Transactions and Covered Bonds' (Jan. 23,
2014);
--'Counterparty Criteria for Structured Finance and Covered
Bonds' (May 13, 2013).
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
Criteria
for Interest Rate Stresses in Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695535
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827679
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