KBRA Europe Assigns Ratings to Zinnia Finance DAC

DUBLIN--()--Kroll Bond Rating Agency Europe Limited (KBRA) assigns ratings to five classes of notes issued by Zinnia Finance DAC, a cash flow collateralised loan obligation (CLO) back by a diversified portfolio of Euro-denominated corporate loans.

Zinnia Finance DAC is a CLO managed by Redding Ridge Asset Management (UK) LLC (RRAM UK or the collateral manager). The CLO will have a three-year reinvestment period and the legal final maturity is 15 October 2031. The ratings reflect initial credit enhancement levels, coverage tests including par value and interest coverage tests, excess spread, and a reinvestment overcollateralisation test.

The collateral in Zinnia Finance DAC will mainly consist of broadly syndicated leveraged loans issued by corporate obligors diversified across sectors. The obligors in the portfolio have a K-WARF of 2393, which represents a weighted average portfolio assessment of approximately B. The total portfolio par amount is €300.0 million with exposures to over 100 obligors. The portfolio is expected to be over 90% ramped at closing, with the remainder acquired before the transaction’s effective date.

RRAM UK, an indirect wholly owned subsidiary of Redding Ridge Asset Management LLC (RRAM), which was established in 2016 by Apollo Global Credit Management, LLC (Apollo) as an independent asset management company. In managing this transaction, RRAM UK will leverage significant resources and research capabilities of the RRAM platform.

The social and economic fallout from the novel coronavirus (COVID-19) pandemic will impact different corporate sectors to varying degrees but broadly, we expect intense pressure on certain cyclical and other non-defensive sectors, with the adverse effects broadening and deepening as the economic dislocation continues. To address this, KBRA considered several scenarios to assess the impact of potential credit migration in the portfolio due to COVID-19.

The ratings on both Class A-1 and A-2 Notes consider timely interest and ultimate principal, and the ratings on Class B, C, and D Notes consider ultimate payment of interest and principal.

KBRA analysed the transaction using Structured Credit Global Rating Methodology published on 13 March 2020 and the and the Global Structured Finance Counterparty Methodology published on 8 August 2018.

Class

Rating

Initial Principal Amount

Interest Rate

Class A-1

AAA (sf)

€174,000,000

3mE + 2.25%

Class A-2

AA (sf)

€20,000,000

3mE + 3.50%

Class B

AA- (sf)

€23,000,000

3mE + 3.75%

Class C

A- (sf)

€17,000,000

3mE + 4.25%

Class D

BBB- (sf)

€15,000,000

3mE + 5.75%

Click here to view the report. To access ratings and relevant documents, click here.

Related Publications

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the EU Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the EU Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA Europe

KBRA Europe is a full-service credit rating agency (CRA) registered with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency, Inc. (KBRA) is a CRA registered as an NRSRO with the U.S. Securities and Exchange Commission and is a certified CRA with ESMA. KBRA is also recognized by the U.S. National Association of Insurance Commissioners as a Credit Rating Provider and is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.

Contacts

Analytical Contacts
John Hogan, Senior Director (Lead Analyst)
+44 208 148 1040
jhogan@kbra.com

George Lyons, CFA, Senior Director
+1 (646) 731-3314
glyons@kbra.com

Sean Malone, CFA, Director
+1 (646) 731-2436
smalone@kbra.com

Eric Hudson, Senior Managing Director (Rating Committee Chair)
+1 (646) 731-3320
ehudson@kbra.com

Business Development Contact
Mauricio Noé, Senior Managing Director
+353 1 588 1220
mnoe@kbra.com

Contacts

Analytical Contacts
John Hogan, Senior Director (Lead Analyst)
+44 208 148 1040
jhogan@kbra.com

George Lyons, CFA, Senior Director
+1 (646) 731-3314
glyons@kbra.com

Sean Malone, CFA, Director
+1 (646) 731-2436
smalone@kbra.com

Eric Hudson, Senior Managing Director (Rating Committee Chair)
+1 (646) 731-3320
ehudson@kbra.com

Business Development Contact
Mauricio Noé, Senior Managing Director
+353 1 588 1220
mnoe@kbra.com