CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a 'AAAsf' rating to the class A-1-R notes of Voya CLO 2014-1, Ltd./ LLC (Voya 2014-1). The Rating Outlook is Stable.
Fitch does not rate class A-2A-R, A-2B-R, B-R, C, D, E or subordinated notes.
TRANSACTION SUMMARY
Voya 2014-1 issued refinancing obligations as class A-1-R, A-2A-R, A-2B-R and B-R notes (collectively, the refinancing notes) and used the net proceeds to redeem the existing class A-1, A-2A, A-2B and B notes at par (plus accrued interest). The remaining class C, D, E and subordinated notes were not refinanced.
In conjunction with the issuance of refinancing notes, two supplemental indentures were executed. The first supplemental indenture was executed to permit refinancing of pari passu classes with different balances, so long as the total of such pari passu classes remains the same. This enabled a rebalancing of classes A-2A-R and A-2B-R as outlined below. The second supplemental indenture incorporated references to the refinanced notes and extended the non-call period to April 2018. Each class of refinancing notes has the same terms as the corresponding class of original notes, with the following exceptions:
--Class A-1-R notes' spread reduced by 17 basis points (bps) to 1.33%;
--Class A-2A-R notes' spread reduced by 15 bps to 1.85%, and the principal amount increased to $41 million from its original balance of $23 million;
--Class A-2B-R notes' interest rate reduced by 98 bps to 3.165%, and the principal amount reduced to $12 million from its original balance of $30 million;
--Class B-R notes' spread reduced by 10 bps to 2.60%.
KEY RATING DRIVERS
The reduction in the cost of the liabilities is viewed as credit positive for class A-1-R notes and the transaction continues to display stable performance since the last review in February 2016. All coverage tests continue to pass and the rating default rate (RDR) and rating loss rate (RLR) for the current portfolio, plus losses to date, are still lower than the RDR and RLR modelled at close. As a result, the modelled Fitch stressed portfolio at close continues to serve as a proxy, and updated cash flow model analysis was not conducted for this rating action. Fitch has determined that the rating on the class A-1-R notes shall be assigned at the same rating level ('AAAsf'; Outlook Stable) as the original class A-1 notes.
As of the Oct. 31, 2016 trustee report, the loan portfolio par amount plus principal cash is approximately $403.2 million. The weighted average life test is 4.74 years compared to a maximum of 5.37. All other collateral quality tests and concentration limitations are in compliance and there are no defaulted assets in the portfolio. The Fitch weighted average rating factor remains at 'B', based on Fitch's Issuer Default Rating (IDR) Equivalency Mapping. Additionally, approximately 88.5% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.
The Stable Outlook on the class A-1-R notes reflects the expectation that these notes have a sufficient level of credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with such class's rating.
RATING SENSITIVITIES
The rating of the class A-1-R notes may be sensitive to the following: asset defaults, portfolio migration, including assets being downgraded to 'CCC', portions of the portfolio being placed on Rating Watch Negative, overcollateralization or interest coverage test breaches, or breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of Voya 2014-1, Ltd./LLC, 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 July 11, 2014.
VARIATIONS FROM CRITERIA
The indenture contains variations from Fitch's 'Counterparty Criteria for Structured Finance and Covered Bonds' because the issuer is permitted to invest in eligible investments that do not have a Fitch rating, and the issuer may establish segregated trust accounts at an institution that does not have a Fitch rating. While the transaction documents permit this, Fitch expects eligible investments to carry Fitch ratings of 'A' or 'F1' (maturities up to 30 days), or 'AA-' or 'F1+' (maturities 30 to 365 days), and the rating of any issuer account bank is expected to be at least 'A' or 'F1' by Fitch. The current eligible investment and account bank meet Fitch's 'Counterparty Criteria for Structured Finance and Covered Bonds'. Fitch will monitor the transaction's eligible investments and the rating of U.S. Bank National Association as the account bank and may take rating action if their ratings no longer satisfy criteria or if they are replaced by another investment or institution that does not satisfy criteria.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool was not prepared for this refinancing. Offering documents for U.S. CLO transactions do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. Therefore, Fitch credit reports for U.S. CLO transactions will not typically include descriptions of RW&Es. For further information, please see Fitch's Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,' dated May 31, 2016.
Fitch has assigned the following rating:
--$256,000,000 class A-1-R notes 'AAAsf'; Outlook Stable.
Class A-1 notes have been marked 'paid-in-full' (PIF).
Additional information is available at www.fitchratings.com.
Sources of Information:
The sources of information used to assess these ratings were the arranger (Mizuho Securities USA, Inc.) and the public domain.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
Sep 2016)
https://www.fitchratings.com/site/re/886006
Global Rating Criteria for CLOs and Corporate CDOs (pub. 09 Sep 2016)
https://www.fitchratings.com/site/re/887497
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015197
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015197
Endorsement Policy
https://www.fitchratings.com/regulatory
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