Fitch to Rate York CLO-2 Ltd./LLC; Issues Presale

NEW YORK--()--Fitch Ratings expects to assign the following rating to York CLO-2 Ltd./LLC:

-- $320,000,000 class A notes 'AAAsf'; Outlook Stable.

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

TRANSACTION SUMMARY

York CLO-2 Ltd. (issuer) and York CLO-2 LLC (co-issuer), together, York 2, comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by York CLO Managed Holdings, LLC (York). Net proceeds will be used to purchase assets to reach a target portfolio of approximately $500 million of 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 36% for class A notes, 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 notes is below the average for recent CLO issuances; however, cash flow modeling indicates performance in line with other 'AAAsf' Fitch-rated CLO notes.

'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is slightly better relative to recent CLOs. Issuers rated in the 'B' rating category denote relatively weak 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 robust against default rates of up to 60.1%.

Strong Recovery Expectations: The indicative portfolio consists of 95.7% senior secured loans. Approximately 89.2% of the indicative portfolio has strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, and the base case recovery assumption is 75.9%. In determining the ratings for the class A notes, 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 38.2% recovery rate assumption 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 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'Asf' and 'AAAsf' for the class A notes.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, which is available to investors on Fitch's website at 'www.fitchratings.com'.

DUE DILIGENCE USAGE

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

The publication of a RW&Es appendix is not required for this transaction.

Additional information is available at www.fitchratings.com.

Sources of Information:

The expected ratings are based on information provided to Fitch as of Sept. 4, 2015. Sources of information used to assess these ratings were provided by the arranger, Credit Suisse Securities (USA) LLC, and the public domain.

York CLO-2 Ltd./LLC (US Structured Credit)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870725

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=990428

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990428

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings, Inc.
Primary Analyst
Erika Tsang, CFA, +1-212-908-0817
Director
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Engin Inci, +1-212-908-0772
Associate Director
or
Committee Chairperson
Derek Miller, +1-312-368-2076
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings, Inc.
Primary Analyst
Erika Tsang, CFA, +1-212-908-0817
Director
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Engin Inci, +1-212-908-0772
Associate Director
or
Committee Chairperson
Derek Miller, +1-312-368-2076
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com