NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed and simultaneously withdrawn the following senior secured notes (notes) issued by Stone Tower Credit Funding I Ltd. (Stone Tower) at 'BBB(sf)':
Series 2006-1 Senior Secured Revolving Notes Due 2016;
Series 2007-3 Senior Secured Revolving Notes Due 2016.
The following notes issued by Stone Tower have been fully redeemed as of May 6, 2016 and are marked paid in full by Fitch:
Series 2006-2 Senior Secured Term Notes Due 2016;
Series 2006-3 Senior Secured Delayed Funding Notes Due 2016;
Series 2006-4 Senior Secured Delayed Funding Notes Due 2016;
Series 2007-1 Senior Secured Delayed Funding Notes Due 2016;
Series 2007-2 Senior Secured Delayed Funding Notes Due 2016.
Stone Tower is a special purpose vehicle created in 2006 with limited liability under the laws of the Cayman Islands to acquire investments through issuing notes and equity managed by Apollo Credit Management, LLC. (Apollo).
The rating affirmations on the senior notes reflect the structural protections to note holders provided by the note indenture and other legal documents including: maintenance of covenanted overcollateralization (OC) tests, restrictions on portfolio concentration, and mandatory deleveraging or portfolio de-risking if there is a breach in the OC tests. The rating also reflects the performance of the structure since inception, and the capabilities of Apollo as investment manager.
Fitch is withdrawing the rating of Stone Tower Credit Funding I Ltd. senior notes as it is no longer considered relevant to the agency's coverage because the delayed funding notes are paid in full and the revolving notes currently have no balance outstanding. Accordingly, Fitch will no longer provide ratings or analytical coverage for Stone Tower Credit Funding I Ltd.
KEY RATING DRIVERS
--The structural protections afforded by mandatory de-risking and
de-leveraging provisions in the event of OC declines;
--The legal and regulatory parameters that govern the Stone Tower's operations;
--The capabilities of Apollo as the investment manager.
As of April 30, 2016, Stone Tower had total assets of approximately $619 million with no $147.9 million of notes outstanding and no amount outstanding on the revolving note facilities. The full principal and accrued interest of the notes outstanding as of April 30, 2016 were paid in full on May 6, 2016. The notes are all pari-passu and issued under the terms of the same indenture. All series share in the same collateral and voting rights.
The terms of the notes require that OC be maintain above a minimum threshold. OC is calculated as a ratio of market value of assets haircut by prescribed advance rates to the outstanding notional amount of notes. The advanced market value of assets also reflects the issuer and industry diversification of the portfolio. OC is tested on a daily basis and Stone Tower is in compliance with the requirement when the advanced amount of market value is greater than the notional amount of notes (i.e. tested with OC tests).
Should the OC test decline below the minimum threshold amounts, the fund manager must cure the breach by altering the composition of the portfolio toward assets with higher advance rates, or by reducing leverage in a sufficient amount. A breach must be cured within 10 business days, if not the manager must formulate and deliver a plan to cure the breach to the trustee and execute the plan within an additional 10 business days. A continuing breach of the OC Test constitutes an event of default which provides the Trustee with certain duties including the liquidation of assets to redeem the notes. Fitch estimates that the maximum exposure period that noteholders face to market value risk is up to 21 business days.
The provisions of the OC tests (including advance rates, diversification requirements, exposure period and eligible investments) were consistent with the guidelines described in Fitch's closed-end fund criteria at the 'BBB' rating level.
As of April 30, 2016 the portfolio was comprised primarily of senior secured bank loans (approximately 77%), with the balance in cash, high yield bonds, CLO notes and common equity.
Apollo Credit Management, LLC (Apollo) is the investment manager and responsible for day-to-day operations of Stone Tower including managing the portfolio of investments, managing compliance with indenture requirements and generally setting and executing investment and leverage strategies. Apollo was established in 1990 and is one of the largest CLO managers by assets under management.
Following the withdrawal of the ratings, rating sensitivities do not apply.
For additional information about Fitch closed-end fund ratings guidelines, please review the criteria referenced below, which can be found on Fitch's website.
To receive Fitch's forthcoming research on closed-end funds please go to:
Additional information is available at 'www.fitchratings.com'.
Rating Closed-End Funds and Market Value Structures (pub. 11 May 2016)
Dodd-Frank Rating Information Disclosure Form