Fitch Rates Venture XVIII CLO, Limited/LLC

CHICAGO--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to Venture XVIII CLO, Limited/LLC (Venture XVIII CLO):

--$271,000,000 class A notes 'AAAsf'; Outlook Stable;

--$100,000,000 class A loans 'AAAsf'; Outlook Stable.

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

TRANSACTION SUMMARY

Venture XVIII CLO, Limited (the issuer) and Venture XVIII CLO, LLC (the co-issuer) represent an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by MJX Asset Management LLC (MJX). Net proceeds from the issuance of the debt will be used to purchase a portfolio of approximately $600 million of leveraged loans. The CLO will have a 4.1-year reinvestment period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 38.2% for class A notes and class A loans (together, the class A debt), in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE for class A debt is above the average for recent CLO issuances.

'B' Asset Quality: The average credit quality of the indicative portfolio is 'B', which is slightly better than that of recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch's opinion, the class A debt is unlikely to be affected by the foreseeable level of defaults. Class A debt is robust against default rates of up to 64.8%.

Strong Recovery Expectations: The indicative portfolio consists of 98.8% first lien senior secured loans. Approximately 94.6% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher, resulting in a base case recovery assumption of 77.8%. In determining the class A debt rating, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions. The analysis of Venture XVIII class A debt assumed a 35.5% recovery rate in Fitch's 'AAAsf' scenario.

RATING SENSITIVITIES

In addition to Fitch's stated criteria, the agency analyzed 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 debt to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'AA-sf' and 'AAAsf' for the class A debt.

The sources of information used to assess these ratings were provided by the arranger, RBC Capital Markets, LLC, and the public domain.

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 [phone] or at '[e-mail]'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Global Rating Criteria for Corporate CDOs' (July 25, 2014);

--'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).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695535

Counterparty Criteria for Structured Finance and Covered Bonds

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=858554

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