NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 18 tranches from 12 collateralized loan obligations (CLOs).
The rating action report, titled 'Fitch Affirms 12 CLOs from Various Vintages', dated May 4, 2016, details the individual rating actions for each rated CLO. It 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 credit enhancement (CE) available to the notes.
Seven out of 12 reviewed CLOs have experienced some deterioration in the credit quality of their performing portfolios, as reflected by the increase in Fitch weighted average rating factor (WARF) since Fitch's last rating action. The accompanying rating action report also details each reviewed CLO's exposure to loans of issuers with Fitch's Issuer Default Rating (IDR) equivalent at 'CCC' or lower.
Further, weighted average spread has come down in all 14 CLOs primarily due to the impact of increasing LIBOR on underlying loans with LIBOR floors. Fitch believes that the observed spread reduction in the underlying portfolios has a limited rating impact for senior notes.
All reviewed transactions continue to have positive cushions between the notes' CE levels and Portfolio Credit Model's (PCM) 'AAAsf' 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 analysing 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 degrees of deterioration. Fitch believes that the Stable Outlook remains an appropriate assessment of the notes' rating stability in the near-term future.
Please see the rating action report linked below for more performance metrics on individual CLOs in this review.
VARIATIONS FROM CRITERIA
Fitch currently addresses operational risk considerations of CLO managers through on-site reviews every two years and updates its assessment as necessary on any organizational changes. In response to recent organizational changes in Och-Ziff Loan Management LP ("Och-Ziff"), Fitch held a conference call with the manager on April 29, 2016 and continues to deem Och-Ziff as an acceptable CLO manager. The criteria variation from Fitch's Global Rating Criteria for CLOs and Corporate CDOs arises from the fact that the last on-site review was conducted more than two years ago.
RATING SENSITIVITIES
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 were originated in 2014 and 2015 and are managed by American Money Management Corporation (AMMC), CIFC Asset Management LLC, Prudential Investment Management, Inc., Shenkman Capital Management, Inc., KKR Financial Advisors II, LLC, Credit Suisse Asset Management, LLC, Monroe Capital LLC, Octagon Credit Investors, LLC, Och-Ziff Loan Management LP, TICP CLO II Management, LLC, and TICP CLO IV Management, LLC. All CLOs remain in their respective reinvestment periods.
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 12 CLOs from Various Vintages; Outlook Stable
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881392
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
Global Rating Criteria for CLOs and Corporate CDOs (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
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1003991
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003991
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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