Fitch Rates Carlyle Global Market Strategies CLO 2014-3-R, Ltd.; Publishes New Issue Report.
--$480,000,000 class A-1A notes 'AAAsf'; Outlook Stable;
--$32,000,000 class A-1B notes 'AAAsf'; Outlook Stable.
Fitch does not rate the class A-2, B, C, D or E notes or the subordinated notes.
Carlyle Global Market Strategies CLO 2014-3-R, Ltd. is an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Carlyle CLO Management L.L.C. Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $800 million of primarily first-lien, senior-secured leveraged loans. The CLO will have an approximately 5.1-year reinvestment period and 2.1-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 40% for class A-1A notes and 36% for the class A-1B notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The degree of CE available to the class A-1A notes is slightly above the average CE of recent CLO issuances, while the CE for the A-1B notes is slightly below such average. Cash flow modeling results for both classes indicate performance in line with other 'AAAsf' Fitch-rated 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, the class A-1A and A-1B notes are unlikely to be affected by the foreseeable level of defaults. Class A-1A and A-1B notes are projected to be able to withstand default rates of up to 64.2% and 60.9%, respectively.
Strong Recovery Expectations: The indicative portfolio consists of 98.4% first lien senior secured loans and 1.6% second lien loans. Approximately 90.5% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher, and the base case recovery assumption is 80.3%. In determining the class A-1A and A-1B notes' ratings, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions in higher rating stress assumptions, resulting in a 39.5% recovery rate assumption in Fitch's 'AAAsf' scenario.
Fitch evaluated the notes' sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates. Fitch expects the class A-1A and A-1B 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-1A and 'A+sf' and 'AAAsf' the class A-1B notes.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
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 was not prepared for this transaction. 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. Therefore, Fitch credit reports for U.S. CLO transactions will not typically include descriptions of RW&Es. For further information, please see Fitch's Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Sep 6, 2018|
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