Fitch Affirms WhiteHorse IX, Ltd.; Outlook Stable

CHICAGO--()--Fitch Ratings has affirmed the class A notes issued by WhiteHorse IX, Ltd. (WhiteHorse IX) at 'AAAsf'/Outlook Stable.

KEY RATING DRIVERS

The affirmation is based on the credit enhancement (CE) available to the rated notes. According to the May 2016 trustee report, the loan portfolio par amount plus the principal collections amount is $400.3 million. However, three obligors, comprising approximately 2.0% of the portfolio (including principal cash), are reported to be in default by the trustee. The transaction is currently failing the Moody's Weighted Average Rating Factor test, the Moody's Default Probability Rating of "Caa1" or below test at 13.9% (versus a trigger of 7.5%), and the S&P Rating of "CCC+" or below test at 8.0% (versus a trigger of 7.5%). However, the transaction continues to pass all coverage tests, all other collateral quality tests and concentration limitations. Sufficient cushion remains between CE and the projected loss rates of the portfolio for the class A notes.

Fitch currently considers 21.3% of the performing portfolio (excluding defaulted obligors and principal cash) to be rated in the 'CCC' category, increasing from 11.2% in the last review in June 2015, based on Fitch's Issuer Default Rating (IDR) Equivalency Map. The weighted average rating of the performing portfolio remains at 'B/B-' since last review. Approximately 88.8% of the performing portfolio is considered to have strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.

This review was conducted under the framework described in the report 'Global Rating Criteria for CLOs and Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. Given the amount of CE cushion remaining on the class A notes, no cash flow analysis was updated for this review.

The Stable Outlook reflects the expectation that the notes have a sufficient level 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 asset defaults, significant negative credit migration, and lower than historically observed recoveries for defaulted assets. Fitch conducted rating sensitivity analysis on the closing date of WhiteHorse IX, 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 New Issue Report published on Sept. 4, 2015.

WhiteHorse IX is an arbitrage, cash flow collateralized loan obligation (CLO) managed by H.I.G. WhiteHorse Capital, LLC. The transaction closed in July 2014 and remains in its reinvestment period, which is scheduled to end in July 2018.

DUE DILIGENCE USAGE

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

Fitch has affirmed the following ratings:

--$252,000,000 class A notes at 'AAAsf'; Outlook Stable.

Fitch does not rate the class B-1, B-2, C, D, E, F and 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, 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

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

Related Research

WhiteHorse IX, Ltd./LLC -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870344

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1005662

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005662

Endorsement Policy

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

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Contacts

Fitch Ratings
Surveillance Analyst
Christine Yoon
Senior Director
+1-212-908-0603
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1-312-368-3184
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Surveillance Analyst
Christine Yoon
Senior Director
+1-212-908-0603
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1-312-368-3184
or
Media Relations
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com