TEXT-S&P Assigns Shackleton II CLO's $366.5M Notes Prelim Ratings

Mon Nov 19, 2012 6:43pm EST

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OVERVIEW

-- Shackleton II CLO Ltd./Shackleton II CLO Corp.'s issuance is a CLO securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans.

-- We assigned our preliminary ratings to the Class A-1, A-X, B-1, B-2, C, D, and E notes.

-- The preliminary ratings reflect our view of the transaction's credit enhancement, legal structure, and diversified collateral portfolio, among other factors.

NEW YORK (Standard & Poor's) Nov. 19, 2012--Standard & Poor's Ratings Services today assigned its preliminary ratings to Shackleton II CLO Ltd./Shackleton II CLO Corp.'s $366.5 million floating- and fixed-rate notes (see list).

The note issuance is a CLO securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans.

The preliminary ratings are based on information as of Nov. 19, 2012. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.

The preliminary ratings reflect our view of:

-- The credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes.

-- The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash-flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation (CDO) criteria (see "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Sept. 17, 2009).

-- The transaction's legal structure, which is expected to be bankruptcy remote.

-- The diversified collateral portfolio, which primarily comprises broadly syndicated speculative-grade senior secured term loans.

-- The collateral manager's experienced management team.

-- Our projections regarding the timely interest and ultimate principal payments on the preliminary rated notes, which we assessed using our cash-flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest rate scenarios, including LIBOR ranging from 0.31% to 11.67%.

-- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding.

-- The transaction's interest diversion test, a failure of which will lead to the reclassification of excess interest proceeds that are available prior to paying uncapped administrative expenses; deferred senior, income, and incentive management fees; hedge payments; and income note payments into principal proceeds for the purchase of additional collateral assets during the reinvestment period.

STANDARD & POOR'S 17G-7 DISCLOSURE REPORT

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities.

The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at "".

RELATED CRITERIA AND RESEARCH

-- "Presale: Shackleton II CLO Ltd./Shackleton II CLO Corp.," Nov. 19, 2012.

-- "Global Investment Criteria For Temporary Investments In Transaction Accounts," May 31, 2012

-- "Counterparty Risk Framework Methodology And Assumptions," May 31, 2012

-- "CDO Spotlight: The Relationship Between Long-Dated Assets And Market Value Risk In U.S. Cash Flow CLOs," April 26, 2012

-- "Global Structured Finance Scenario And Sensitivity Analysis: The Effects of The Top Five Macroeconomic Factors," Nov. 4, 2011

-- "CDO Spotlight: Standard & Poor's Surveillance Process For Monitoring U.S. Cash Flow CLO Transactions," April 14, 2011

-- "Credit FAQ: What Are Credit Estimates And How Do They Differ From Ratings?" April 6, 2011

-- "CLO Collateral Managers' Treatment Of First-Lien-Last-Out Loans Could Affect Payments To Investors," Oct. 14, 2010

-- "Methodology For Analyzing Rating Confirmation Requests To Establish Subsidiary Special-Purpose Entities In CDOs," Dec. 9, 2009

-- "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," Sept. 17, 2009

-- "Surveillance Methodology For Global Cash Flow And Hybrid CDOs Subject To Acceleration Or Liquidation After An EOD," Sept. 2, 2009

-- "Methodology For Analyzing Rating Confirmation Requests To Replace Collateral Managers In Global CDOs," Aug. 13, 2009

-- "The Use Of Rating-Based Haircuts In Event Of Default Overcollateralization Tests For CDOs," March 19, 2008

-- "Revised CDO Current-Pay Criteria Assumptions For Corporate Debt When Issuers Announce A Distressed Exchange Or Buyback," May 18, 2009

-- "Qualification And Treatment Of Current-Pay Obligations In Global Cash Flow CLOs," July 11, 2007

-- "Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities," Oct. 1, 2006

-- "CDO Spotlight: General Cash Flow Analytics For CDO Securitizations," Aug. 25, 2004

-- "Structured Finance Criteria Introduced For Cayman Islands Special-Purpose Entities," July 18, 2002

-- "The CDO Product," March 21, 2002

PRELIMINARY RATINGS ASSIGNED

Shackleton II CLO Ltd./Shackleton II CLO Corp.

Class Rating Interest Amount

rate (Mil. $)

A-1 AAA (sf) Floating 254.0

A-X AAA (sf) Floating 7.5

B-1 AA (sf) Floating 15.0

B-2 AA (sf) Fixed 25.0

C (deferrable) A (sf) Floating 24.0

D (deferrable) BBB (sf) Floating 20.0

E (deferrable) BB (sf) Floating 21.0

FILED UNDER:
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