NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the class A-1 notes issued by Anchorage Capital CLO 2013-1, Ltd. (Anchorage Capital CLO 2013-1) at 'AAAsf'. The Rating Outlook remains Stable.
KEY RATING DRIVERS
The rating affirmation reflects the stable performance of the underlying portfolio since the transaction's inception in June 2013 as well as the stable credit enhancement available to the notes. As of the May 2, 2014 trustee report, the transaction continues to pass all of its coverage and collateral quality tests, and there are currently no defaults in the underlying portfolio.
The loan portfolio par amount plus principal cash is approximately $501.5 million, compared to the target par balance of $500 million at close, slightly increasing the credit enhancement level to the class A-1 notes to 41.2% from 41.0% at closing. The weighted average rating factor of the portfolio remains unchanged at 'B/B-' and the weighted average spread (WAS) is reported to be 4.00%, relative to a trigger of 3.50%. Fitch currently considers 4.9% of the collateral assets to be rated in the 'CCC' category based on Fitch's Issuer Default Rating (IDR) Equivalency Map. Second lien loans and bonds represent 7.5% of the current portfolio, as compared to a permitted 10% limitation, with the remaining portfolio being invested in first lien senior secured loans.
The Stable Outlook reflects Fitch's expectation that the class A-1 notes have sufficient level of credit protection to withstand potential deterioration in the credit quality of the portfolio, based on the results of the Fitch sensitivity analysis described below.
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 Anchorage Capital CLO 2013-1, 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 in June 2013, there was no updated cash flow modeling completed. The portfolio's 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 54.6% and 38.1% respectively, versus an RDR of 57.6% and RRR of 37.0% for the indicative portfolio at closing and an RDR of 62.7% and RRR of 35.9% for the Fitch Stressed Portfolio at closing.
Initial Key Rating Drivers and Rating Sensitivity are further described in the new issue report published on Aug. 8, 2013, which is available at 'www.fitchratings.com'. 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.
Anchorage Capital CLO 2013-1 is an arbitrage, cash flow collateralized loan obligation (CLO) that closed on June 27, 2013 and is managed by Anchorage Capital Group, LLC. The transaction remains in its reinvestment period, which is scheduled to end in July 2017.
Fitch has affirmed the following rating:
Anchorage Capital CLO 2013-1:
--$295,000,000 class A-1 notes at 'AAAsf'; Outlook Stable.
Fitch does not rate the class A-2a, A-2b, B, C, D, or E notes or the subordinated notes.
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 20, 2014);
--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2013);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);
--'Anchorage Capital CLO 2013-1, Limited/LLC New Issue Report' (Aug. 8, 2013);
--'Anchorage Capital CLO 2013-1, Limited/LLC Representations and Warranties New Issue Appendix' (Aug. 8, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Global Rating Criteria for Corporate CDOs
Counterparty Criteria for Structured Finance and Covered Bonds
Anchorage Capital CLO 2013-1, Limited/LLC
Anchorage Capital CLO 2013-1, Limited/LLC -- Appendix