Fitch Rates Betony CLO Ltd./LLC Refinancing Obligations

CHICAGO--()--Fitch Ratings has assigned the following ratings to Betony CLO Ltd./LLC (Betony CLO):

--$134,000,000 class A-R notes 'AAAsf'; Outlook Stable;

--$250,000,000 class A-R loans 'AAAsf'; Outlook Stable;

--$0 class A-RL notes 'AAAsf'; Outlook Stable.

Class A notes have been marked 'PIF.'

Fitch does not rate the class B-R, C-R, D, D-DD, E, E-DD, F, F-DD or subordinated notes.

KEY RATING DRIVERS

Betony CLO Ltd./LLC issued class A-R, B-R and C-R notes (collectively, the refinancing notes) and borrowed under the class A-R loans (together with the refinancing notes, the refinancing obligations) and applied the net proceeds thereof to redeem the existing class A, B and C notes at par (plus accrued interest) on the refinancing date of Nov. 29, 2016. The class D, E, F and subordinated notes were not refinanced.

The refinancing notes generally have the same terms as the previously outstanding classes; except that the stated coupons have changed and the $384 million class A notes are refinanced with the issuance of $134 million class A-R notes and the incurrence of $250 million of class A-R loans. The class B-R and C-R notes were issued in the same amounts as the previously outstanding class B and C notes. The spread over LIBOR of 1.51% on the class A notes was reduced to 1.35% and 1.40% on the class A-R notes and class A-R loans (together with the class A-RL notes, the class A debt), respectively. Spreads over LIBOR on the class B-R and C-R notes have decreased to 1.95% and 2.85%, respectively. The class A debt is also subject to a 0% LIBOR floor.

The reduction in the cost of liabilities is viewed as credit positive and no other material changes were made to the capital structure or underlying portfolio as a result of the refinancing.

The transaction is still its reinvestment period (ending April 2019) and continues to display stable performance since Fitch's last review in February 2016. All coverage tests continue to pass and the rating default rate (RDR) and rating loss rate (RLR), plus losses to date for the current portfolio are still lower than the RDR and RLR modelled for the stress portfolio at close. As a result, the modelled Fitch stressed portfolio at close continues to serve as a proxy, and an updated cash flow analysis was not conducted for these rating actions. Fitch has determined that the ratings of the class A debt shall be assigned at the same rating level ('AAAsf'/Outlook Stable) as the original class A notes.

The lender of the class A-R loans have the option to convert all or a portion of the outstanding loan principal amount into an equivalent principal amount of class A-RL notes on the applicable conversion date. The class A-RL notes will accrue interest at the same rate as the class A-R loans upon conversion. If the entire amount of the class A-R loan is converted, the class A-R loan will be deemed to have been repaid in full. The class A debt is also not subject to subsequent refinancings or repricings.

The Stable Outlook on each class of debt reflects the expectation that each class has sufficient levels 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 ratings of the notes may be sensitive to the following: 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 the Betony CLO 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 March 29, 2016.

DUE DILIGENCE USAGE

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 is available by accessing the appendix referenced under "Related Research" below. 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. However, the offering document of this transaction refinancing included a draft of the supplemental indenture as a supplemental exhibit, which contains RW&Es related to the underlying asset pool of the CLO. For further information, please see Fitch's Special Report titled Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,' dated May 31, 2016.

Link to Fitch Ratings' Report: Betony CLO, Ltd.

https://www.fitchratings.com/site/re/891325

Additional information is available at www.fitchratings.com.

Sources of Information:

The information used to assess these ratings was sourced from periodic trustee reports, the public domain and the arranger, Credit Suisse Securities (USA) LLC.

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=1015510

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015510

Endorsement Policy

https://www.fitchratings.com/regulatory

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Contacts

Fitch Ratings
Primary Analyst
Nazneen Kutty
Associate Director
+1-312-368-3217
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Christine Yoon
Senior Director
+1-212-908-0603
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
Primary Analyst
Nazneen Kutty
Associate Director
+1-312-368-3217
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Christine Yoon
Senior Director
+1-212-908-0603
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