CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed 16 tranches from 13 collateralized loan obligations (CLOs).
The rating action report, 'Fitch Affirms 13 CLOs from Various Vintages', dated March 25, 2016, details the individual rating actions along with key performance drivers, such as credit enhancement levels (CE) and portfolio credit quality metrics, for each rated CLO. The report can be found on Fitch's website at 'www.fitchratings.com' by performing a title search or by using the link below. For further information and transaction research please refer to 'www.fitchratings.com'.
KEY RATING DRIVERS
The affirmations on all classes included in this review are based on the sufficient CE levels available to the notes.
The credit quality of the underlying portfolios in 8 of 13 CLOs has deteriorated as reflected in the increased Fitch Weighted Average Rating Factor (WARF) since Fitch's last rating action. Seven out of 13 CLOs have reported defaults in their most recent report available for this review.
Further, weighted average spread has come down in all of these CLOs primarily due to the impact of increasing LIBOR on underlying loans with LIBOR floors. However, Fitch believes that the current observed spread reduction in the underlying portfolios has a limited rating impact for senior notes.
Among the reviewed CLOs, Halcyon Loan Advisors Funding 2015-1 Ltd., Whitehorse VIII, Ltd., and Battalion CLO VIII Ltd., currently have the highest exposure to commodity sector issuers. In addition to the already experienced deterioration in the credit quality and performance metrics, these transactions are likely to experience further negative migration, as the commodity sectors' downturn is expected to continue in 2016.
All of the transactions continue to have positive cushions between the notes' CE levels and relevant Portfolio Credit Model's (PCM) Rating Loss Rates. Fitch's PCM calculates Rating Default Rates and Rating Loss Rates for all rating stresses, as detailed in the report 'Global Rating Criteria for CLOs and Corporate CDOs,' which describes Fitch's framework for analyzing CLOs.
Given the positive cushions, no updated cash flow modelling was completed for this review. In addition, these positive cushions were considered to be sufficient at this point to buffer all reviewed notes against potential further moderate degree of deterioration. Fitch believes that the Stable Outlook remains an appropriate assessment of the notes' rating stability.
The ratings of the notes are sensitive to significant negative credit migration and asset defaults and lower than historically observed recoveries for defaulted assets. Fitch conducted rating sensitivity analysis on the closing date of each CLO, incorporating increased levels of defaults and reduced levels of recovery rates among other sensitivities.
The transactions included in this rating action originated in 2014-2015 and are managed by Anchorage Capital Group, LLC, Arrowpoint Asset Management, LLC, Brigade Capital Management, LP, Canyon Capital Advisors LLC, Halcyon Structured Asset Management LP, H.I.G. WhiteHorse Capital, LLC, Mariner Investment Group, LLC, Guggenheim Partners Investment Management, LLC, Valcour Capital Management LLC, and Voya Alternative Asset Management LLC. All CLOs remain within their reinvestment period; however Mariner CLO 2015-1 LLC will be reaching its reinvestment cut-off date in April 2016. The class A notes have received 0.5% of their original balance.
DUE DILIGENCE USAGE
No third-party due diligence was reviewed in relation to this rating action.
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 and the public domain.
Fitch Affirms 13 CLOs from Various Vintages
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Global Rating Criteria for CLOs and Corporate CDOs (pub. 12 Nov 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Anchorage Capital CLO 6, Ltd./LLC -- Appendix
Arrowpoint CLO 2015-4, Ltd./LLC -- Appendix
Battalion CLO VIII Ltd./LLC -- Appendix
Canyon Capital CLO 2015-1, Ltd./LLC - Appendix
Crown Point CLO III, Ltd./LLC -- Appendix
Halcyon Loan Advisors Funding 2015-1 Ltd./LLC -- Appendix
Mariner CLO 2015-1 LLC -- Appendix
NZCG Funding 2 Limited/LLC -- Appendix
Voya CLO 2014-2, Ltd./LLC -- Appendix
Voya CLO 2014-3, Ltd./LLC -- Appendix
Voya CLO 2015-1, Ltd./LLC -- Appendix
WhiteHorse VIII, Ltd./LLC -- Appendix
WhiteHorse X, Ltd./LLC - Appendix
Dodd-Frank Rating Information Disclosure Form