RPT-Fitch Affirms Wood Street CLO VI B.V.'s Notes

Fri Jan 24, 2014 7:41am EST

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Jan 24 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Wood Street CLO VI B.V.’s notes, as follows:

EUR207.1m Class A-1 (ISIN XS0315358084): affirmed at 'AAAsf'; Outlook Stable

EUR15.0m Class A-2 (ISIN XS0315362433): affirmed at 'AAAsf'; Outlook Stable

EUR23.7m Class B (ISIN XS0315364991): affirmed at 'AAsf'; Outlook Stable

EUR18.4m Class C (ISIN XS0315365451): affirmed at 'BBB+sf'; Outlook revised to Stable from Negative

EUR15.5m Class D (ISIN XS0315365618): affirmed at 'BB+sf'; Outlook revised to Stable from Negative

EUR13.2m Class E (ISIN XS0315366186): affirmed at 'B-sf'; Outlook revised to Stable from Negative

KEY RATING DRIVERS

The affirmation reflects the sufficient credit enhancement for all notes. The revision of the Outlooks on the mezzanine and junior notes recognises the material reduction in exposure to short-term refinancing risk.

Since the last review (February 2013), the underlying portfolio has deteriorated slightly with the Fitch weighted average rating factor rising to 36.05 from 35.51 per the current Fitch rating factor weights. The exposure to 'CCC' rated and below assets has increased to 8.4% from 5.9% year on year (December 2012 to December 2013). In the same period, the weighted average spread increased to 4.52% from 4.15%.

The weighted average life (WAL) of the portfolio has increased to 4.5 years from 3.9 years since the last review due to the shift in the portfolio's maturity profile. The exposure to assets maturing between 2014-2015 has declined by 85% year on year (to 4.1% of the outstanding portfolio), substantially reducing the short-term exposure to refinance risk, while the proportion of the portfolio maturing after 2017 increased to 62.0% from 24.8%.

The over-collateralisation (OC) tests are all comfortably passing and have remained steady during the past year. The headroom on the most junior OC test is currently 4.3%, which is considered material, despite being down slightly from 4.4% at the last review. There have been no new defaults in the portfolio since the last review. Current defaults represent 1.6% of the outstanding portfolio balance.

The transaction remains in its reinvestment period until October 2014. The portfolio is diversified at the industry level. However, exposure to periphery countries Ireland, Italy and Spain is considered significant at 13.6%, albeit down from 15.1% at the last review.

Wood Street CLO VI B.V. is a securitisation of mainly European senior secured loans, senior unsecured loans, second-lien loans, mezzanine obligations, high-yield bonds and structured finance securities. At closing, a total note issuance of EUR325.8m was used to invest in a target portfolio of EUR317.05m. The portfolio is actively managed by Alcentra Ltd.

RATING SENSITIVITIES

Fitch ran various rating sensitivity scenarios on the transaction to assess the impact on the notes' ratings if the key risk drivers - default rates and recovery rates - were stressed. Increasing the default probability of all the assets in the portfolio by 25% would likely result in a downgrade of the notes of between two and four notches while applying a recovery rate haircut of 25% on all the assets would likely result in a downgrade of the notes of between one and three notches.

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