Fitch to Rate Apidos CLO XXIV; Issues Presale.
--$242,000,000 class A-1A-R notes 'AAA(EXP)sf'; Outlook Stable;
--$18,000,000 class A-1B-R notes 'AAA(EXP)sf'; Outlook Stable.
Fitch does not expect to rate the class A-2L-R, A-2F-R, B-R, C-R, D-R, E-R or subordinated notes.
Apidos CLO XXIV (the issuer) is an arbitrage cash flow collateralized loan obligation (CLO) managed by CVC Credit Partners, LLC (CVC) that originally closed in August 2016. The CLO's secured notes are expected to be refinanced in whole on Sept. 14, 2018 (the refinancing date), with proceeds from the issuance of the new secured notes. The new notes and existing subordinated notes will be used to provide financing for approximately $400 million of primarily first lien, senior secured leveraged loans. After the refinancing date, the CLO will have an approximately 5.1-year reinvestment period and a 2.1-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 39.5% for the class A-1A-R notes and 35.0% for the class A-1B-R notes (together, class A-1-R 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 the class A-1A-R notes is above the average CE of recent Fitch-rated 'AAAsf' CLO issuances, while CE available to class A-1B-R notes is below such average. 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, the class A-1-R notes are unlikely to be affected by the foreseeable level of defaults. Class A-1A-R and A-1B-R notes are projected to be able to withstand default rates of up to 64.7% and 61.6%, respectively.
Strong Recovery Expectations: The indicative portfolio comprises 98.6% first lien, senior secured loans and 1.4% second lien loans. Approximately 87.1% 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 79.9%. In determining the class A-1-R notes' 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 38.6% recovery rate in its '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 'BBB-sf' and 'AAAsf' for class A-1A-R. Results under these sensitivity scenarios ranged between 'BB+sf' and 'AAAsf' for class A-1B-R notes.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, which is available to investor's on Fitch's website at '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.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Nov 26, 2018|
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