Fitch Affirms 7 Classes of OHA Loan Funding 2014-1, LLC; Outlook Stable

CHICAGO--()--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 asset model implied ratings. As of the October 2016 trustee report, the transaction continues to pass all coverage tests and collateral quality tests, with no reported defaults. Portfolio Credit Model results show that expected default and loss rates have declined since last review and are below those modeled in the Fitch stressed portfolio cash flow analysis at transaction close.

The total loan portfolio par amount plus $45.2 million principal cash is approximately $848.5 million, as of the October 2016 trustee report. The weighted average spread (WAS) of the portfolio has tightened to 4.05% from 4.58% at last review in November 2015, relative to a minimum WAS trigger of 4.0%; however, remains above 3.65% stressed at initial rating. The portfolio, excluding cash, is invested in 98.4% senior secured loans. Approximately 86.6% of the portfolio has strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher. The performing portfolio remains in the 'B/B-' range, according to Fitch's Issuer Default Rating (IDR) Equivalency Map.

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 a higher rate of asset defaults and portfolio migration or significantly lower recoveries as compared to the levels expected at the initial rating. 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 New Issue Report published on Nov. 11, 2014.

OHA 2014-1 is an arbitrage cash flow CLO that is managed by Oak Hill Advisors L.P., with a reinvestment period ending in October 2018 and a noncall period, which ended in October 2016. The manager has the ability to reinvest unscheduled principal proceeds and sales proceeds from the disposal of credit risk or credit improved obligations after the reinvestment period, subject to certain conditions.

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.

DUE DILIGENCE USAGE

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

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

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.

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, 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

Related Research

OHA Loan Funding 2014-1, LLC Appendix

https://www.fitchratings.com/site/re/877707

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015283

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015283

Endorsement Policy

https://www.fitchratings.com/regulatory

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Contacts

Fitch Ratings
Surveillance Analyst
Nazneen Kutty
Associate Director
+1-312-368-3217
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1-312-368-3184
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Surveillance Analyst
Nazneen Kutty
Associate Director
+1-312-368-3217
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1-312-368-3184
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com