Fitch Rates ACAS CLO 2015-2, Ltd./LLC

NEW YORK--()--Fitch Ratings assigns the following ratings to ACAS CLO 2015-2, Ltd./LLC:

--$225,000,000 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

ACAS CLO 2015-2, Ltd. (the issuer) and ACAS CLO 2015-2, LLC (the co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by American Capital CLO Management, LLC (ACCLOM). Net proceeds from the issuance of the secured debt and subordinated notes will be used to purchase a portfolio of approximately $500 million of primarily senior secured leveraged loans. The CLO will have an approximately four-year reinvestment period and two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 35% for the class A notes and class A loans (collectively, class A debt), 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 debt is lower than the average CE of recent CLO issuances; however, cash flow modelling indicates performance in line with other 'AAAsf' CLO notes.

'B+/B' Asset Quality: The average credit quality of the indicative portfolio is approximately '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 debt is unlikely to be affected by the foreseeable level of defaults. Class A debt is projected to be able to withstand default rates of up to 60.9%.

Strong Recovery Expectations: The indicative portfolio consists of 97.4% first lien loans. Approximately 92.4% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher and the base case recovery assumption is 78.2%. In determining the class A debt ratings, 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 stresses resulting in a 36.6% recovery rate in Fitch's 'AAAsf' scenario.

RATING SENSITIVITIES

Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in 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 'A+sf' and 'AAAsf' for the class A debt.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

The publication of a representations, warranties and enforcement mechanisms appendix is not required for this transaction.

Additional information is available at www.fitchratings.com.

Sources of Information:

The information used to assess these ratings was sourced from the arranger (Wells Fargo Securities, LLC) and the public domain.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

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

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Global Rating Criteria for CLOs and Corporate CDOs (pub. 30 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868908

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989972

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989972

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
John Um, CFA
Director
+1-212-908-0287
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Robert Rhein
Director
+1-312-606-2314
or
Committee Chairperson
Kevin Kendra
Managing Director
+1-212-908-0760
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
John Um, CFA
Director
+1-212-908-0287
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Robert Rhein
Director
+1-312-606-2314
or
Committee Chairperson
Kevin Kendra
Managing Director
+1-212-908-0760
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com