Fitch Assigns Rating to Race Point VI CLO, Limited/Corp. Refinancing Notes
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a new rating to the class A-R refinancing notes issued by Race Point VI CLO, Limited/Corp. (Race Point VI).
KEY RATING DRIVERS
Fitch has been notified of a proposed Supplemental Indenture that would cause a refinancing of the outstanding notes and amend certain terms and definitions of the indenture. The collateral portfolio continues to display stable performance since the last review in April 2014 and credit enhancement levels will remain the same on the refinancing notes. On Aug. 25, 2014, the issuer will issue refinancing notes as class A-R, B-R, C-R, and D-R and apply the net issuance and sales proceeds thereof to redeem the existing class A, B, C, and D at par (plus accrued interest). Each class of refinancing notes will be issued in the same amounts and have the same terms as the corresponding class of original notes, except that the spreads on all classes will be reduced. In addition, the spread on the class E notes will be increased by 25 basis points. Since the overall reduction in costs on the liabilities is viewed as a credit positive and no other changes will be made to the capital structure or underlying portfolio as a result of the refinancing, a cash flow model analysis was not conducted for this review and Fitch has determined that the rating on the refinancing notes shall be assigned at the same rating level as the original notes.
The rating of the 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 (OC) or interest coverage (IC) test breaches, or breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of Race Point VI, 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 June 15, 2012. In conjunction with the refinancing, certain provisions of the indenture have been amended by the Supplemental Indenture. The amendment addresses Volcker Rule concerns and will no longer allow for the investment of non-loan assets such as senior secured notes and bonds in the collateral portfolio. In addition, the new refinancing notes are restricted from being re-priced or refinanced again in the future. Fitch believes that the changed provisions from the Supplemental Indenture, including the ones noted above, will have no impact on the rating of the refinancing notes.
A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that asset class is also available by accessing the reports and links indicated below.
Race Point VI is an arbitrage, cash flow collateralized loan obligation (CLO) that closed on May 24, 2012 and is managed by Sankaty Advisors, LLC.
Fitch has taken the following rating actions, effective August 25, 2014, on the following:
--$243,000,000 class A notes marked as PIF;
--$243,000,000 class A-R notes rated 'AAAsf'; Outlook Stable.
Fitch does not rate the class B-R, C-R, D-R, E, or Subordinated notes.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria & Related Research:
--'Global Structured Finance Rating Criteria' (August 4, 2014);
--'Global Rating Criteria for Corporate CDOs' (July 25, 2014);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);
--'Race Point VI, CLO Limited New Issue Report' (June 15, 2012);
--'Race Point VI, CLO Limited -- Appendix' (June 15, 2012).
Applicable Criteria and Related Research:
Race Point VI CLO, Limited
Race Point VI CLO, Limited -- Appendix
Counterparty Criteria for Structured Finance and Covered Bonds
Global Rating Criteria for Corporate CDOs
Global Structured Finance Rating Criteria