NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to Symphony CLO XVII, Ltd./LLC:
--$280,750,000 class A-1 notes 'AAAsf'; Outlook Stable;
--$40,000,000 class A-2 notes 'AAAsf'; Outlook Stable.
Fitch does not rate the class B, C, D, E or subordinated notes.
Symphony CLO XVII, Ltd. and Symphony CLO XVII LLC comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Symphony Asset Management LLC. Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $500 million of primarily senior secured leveraged loans. The CLO will have an approximately four-year reinvestment period and a two-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 43.9% for class A-1 and 35.9% for class A-2 notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAAsf' stress scenario. The degree of CE available to class A-1 notes is well above the average CE of recent CLO issuances. The level of CE available to the class A-2 notes is below the average CE of recent CLO issuances; cash flow modeling results for both classes indicate performance in line with other Fitch-rated 'AAAsf' CLO notes.
'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch's opinion, class A-1 and A-2 notes are unlikely to be affected by the foreseeable level of defaults. Class A-1 and A-2 notes are robust against default rates of up to 77.9% and 67%, respectively.
Strong Recovery Expectations: The indicative portfolio consists of 98.2% first lien senior secured loans. Approximately 92.5% of the indicative portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher, and the base case recovery assumption is 79.6%. In determining the class A-1 and A-2 note ratings, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stresses, resulting in a 39.5% recovery rate in Fitch's 'AAAsf' scenario.
Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. Fitch expects the class A-1 notes and class A-2 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'AA+sf' and 'AAAsf' for the class A-1 notes and 'A+' and 'AAA' for the class A-2 notes.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which is available to investor's on Fitch's website at 'fitchratings.com'.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Click on the link below for an analysis of the representations, warranties, and enforcement mechanisms available to investors in transaction documents for this transaction and how they compare to those of similar securities.
Additional information is available at www.fitchratings.com.
Sources of Information:
Sources of information used to assess these ratings were provided by the arranger, GreensLedge Capital Markets LLC and the public domain.
Symphony CLO XVII, Ltd./LLC
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
Global Rating Criteria for CLOs and Corporate CDOs (pub. 12 Nov 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Symphony CLO XVII, Ltd./LLC Appendix
Dodd-Frank Rating Information Disclosure Form