Fitch Affirms OHA Loan Funding 2014-1, LLC

NEW YORK--()--Fitch Ratings has affirmed seven classes of notes issued by OHA Loan Funding 2014-1, LLC (OHA 2014-1). A complete list of rating actions follows at the end of the release.

KEY RATING DRIVERS

The affirmations are based on the stable performance of the underlying portfolio, the sufficient credit enhancement available to the notes, and the cushions available in the CLO's cash flow modeling results. As of the October 2015 trustee report, the transaction continues to pass all coverage tests and collateral quality tests, with no reported defaults to date. Fitch's cash flow analysis also indicates each class of notes is passing all nine interest rate and default timing scenarios at or above their current rating levels.

The loan portfolio par amount plus principal cash is approximately $855.7 million, compared to the target par balance of $854.5 million at closing in December 2014, resulting in relatively stable credit enhancement levels. The weighted average spread (WAS) of the portfolio is at 4.58%, versus a minimum WAS trigger of 4.50% as reported by the trustee. The portfolio, excluding cash, is invested in 96.9% senior secured loans and 3.1% second lien loans, and approximately 87.6% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.

The Stable Outlook on each class of notes of OHA 2014-1 reflects the expectation that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio.

RATING SENSITIVITIES

The ratings of the notes may be sensitive to the following: asset defaults, significant negative credit migration, lower than historically observed recoveries for defaulted assets, and breaches of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of OHA 2014-1, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities. Initial Key Rating Drivers and Rating Sensitivity are further described in the Presale Report published on Nov. 11, 2014.

A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that asset class is available by accessing the reports and links indicated below.

OHA 2014-1 is an arbitrage cash flow collateralized loan obligation (CLO) that is managed by Oak Hill Advisors, L.P. (Oak Hill). The transaction remains in its reinvestment period, which is scheduled to end in October 2018.

This review was conducted under the framework described in the report 'Global Rating Criteria for CLOs and Corporate CDOs' using Fitch's Portfolio Credit Model (PCM) to project future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various combinations of default timing and interest rate stress scenarios, as described in the report. The cash flow model was customized to reflect the transaction's structural features.

DUE DILIGENCE USAGE

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

Fitch has affirmed the following ratings:

--$507,000,000 class A-1 notes at 'AAAsf'; Outlook Stable;

--$25,000,000 class A-2 notes at 'AAAsf'; Outlook Stable;

--$52,000,000 class B-1 notes at 'AAsf'; Outlook Stable;

--$29,800,000 class B-2 notes at 'AAsf'; Outlook Stable;

--$34,000,000 class C notes at 'Asf'; Outlook Stable;

--$38,500,000 class D notes at 'BBBsf'; Outlook Stable;

--$50,500,000 class E notes at 'BBsf'; Outlook Stable.

Fitch does not rate the subordinated notes.

Additional information is available at www.fitchratings.com.

Sources of Information:

The information used to assess these ratings was sourced from periodic servicer reports, note valuation reports, Oak Hill, 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 - Amended (pub. 12 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873664

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

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

Related Research

OHA Loan Funding 2014-1, LLC -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=806208

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=995375

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=995375

Endorsement Policy

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

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Contacts

Fitch Ratings
Primary Surveillance Analyst
Felix Chen
Associate Director
+1-212-908-9154
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
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 Surveillance Analyst
Felix Chen
Associate Director
+1-212-908-9154
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Kendra
Managing Director
+1-212-908-0760
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com