Fitch Rates Whitehorse XII Ltd.; Publishes New Issue Report.
--$283,500,000 class A notes 'AAAsf'; Outlook Stable.
Fitch does not rate the class X, B, C, D, E or the subordinated notes.
Whitehorse XII Ltd. (the issuer) comprises an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Whitehorse Capital Management, LLC (WCM). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of $450 million of primarily first lien, senior secured loans. The CLO will have an approximately 5.05-year reinvestment period and a 2.05-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 37.0% for class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE for the class A notes is in line with average CE of recent CLO issuances.
'B+'/'B' Asset Quality: The average credit quality of the indicative portfolio is 'B+'/'B', which is in line with that of recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch Ratings' opinion, the class A notes are unlikely to be affected by the foreseeable level of defaults. The class A notes are projected to be able to withstand default rates of up to 57.9%.
Strong Recovery Expectations: The indicative portfolio consists of 100% first lien, senior secured loans. Approximately 94.8% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, resulting in a base case recovery assumption of 82.2%. In determining the rating for class A notes, 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 39.4% recovery rate 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. Results under these sensitivity scenarios ranged between 'BB+sf' and 'AAAsf' for the class A notes
Key rating drivers and rating sensitivities are further described in the accompanying new issue report, which is available to investors at www.fitchratings.com or by clicking on the link.
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.