Fitch Rates Magnetite VIII, Limited/LLC

CHICAGO--()--Fitch Ratings assigns the following rating to Magnetite VIII, Limited/LLC:

--$367,500,000 class A notes 'AAAsf'; Outlook Stable.

Fitch does not rate the class B, C, D, E, F or subordinated notes.

TRANSACTION SUMMARY

Magnetite VIII, Limited (the issuer) and Magnetite VIII LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by BlackRock Financial Management, Inc. (BlackRock). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $600 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 38.8% 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' Asset Quality: The average credit quality of the indicative portfolio is '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, the class A notes are unlikely to be affected by the foreseeable level of defaults. The class A notes are projected to be able to withstand default rates of up to 62.5%.

Strong Recovery Expectations: The indicative portfolio consists of 94.1% first lien senior secured loans. Approximately 91.2% 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'.

Sources of information used to assess these ratings were 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 14, 2014);

--'Magnetite VIII, Limited/LLC -- Appendix' (April 15, 2014).

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 and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725537

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Magnetite VIII, Limited/LLC -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746616

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=830339

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Contacts

Fitch Ratings
Primary Analyst
Robert Rhein
Director
+1 312-606-2314
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Joseph Farfsing
Associate Director
+1 312-368-3346
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1 312-368-3184
or
Media Relations, New York
Sandro Scenga, Tel: +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Robert Rhein
Director
+1 312-606-2314
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Joseph Farfsing
Associate Director
+1 312-368-3346
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1 312-368-3184
or
Media Relations, New York
Sandro Scenga, Tel: +1 212-908-0278
Email: sandro.scenga@fitchratings.com