(Repeat for additional subscribers)
May 19 (The following statement was released by the rating agency)
This announcement corrects the version published earlier today, which incorrectly stated the
class B-1, B-2, C-1 and C2 notes' amounts.
Fitch Ratings has assigned Arbour CLO Limited notes expected ratings, as
EUR208.75m class A: 'AAA(EXP)sf'; Outlook Stable
EUR26.25class B-1: 'AA(EXP)sf'; Outlook Stable
EUR19.95m class B-2: 'AA(EXP)sf'; Outlook Stable
EUR11.25m class C-1: 'A+(EXP)sf'; Outlook Stable
EUR10.75m class C-2: 'A+(EXP)sf'; Outlook Stable
EUR19.75m class D: 'BBB+(EXP)sf'; Outlook Stable
EUR26.675m class E: 'BB+(EXP)sf'; Outlook Stable
EUR12.125m class F: 'B-(EXP)sf'; Outlook Stable
EUR39.5m subordinated notes: not rated
The assignment of final ratings is contingent on the receipt of final documents
conforming to information already reviewed.
Arbour CLO Limited is an arbitrage cash flow collateralised loan obligation
KEY RATING DRIVERS
Average Portfolio Credit Quality
Fitch expects the average credit quality of obligors to be in the 'B' category.
The agency has public ratings or credit opinions on all 59 obligors in the
initial portfolio. The covenanted maximum Fitch weighted average rating factor
(WARF) for assigning the expected ratings is 34.0. The WARF of the initial
portfolio is 31.7.
High Expected Recoveries
The portfolio will comprise a minimum of 90% senior secured obligations.
Recovery prospects for these assets are typically more favourable than for
second-lien, unsecured and mezzanine assets. Fitch has assigned Recovery Ratings
(RR) to all obligations in the initial portfolio. The covenanted minimum
weighted average recovery rate (WARR) for assigning the expected ratings is 69%.
The WARR of the initial portfolio is 74.8%.
Payment Frequency Switch
The notes pay quarterly while the portfolio assets can reset to a semi-annual
basis. The transaction has an interest-smoothing account, but no liquidity
facility. Liquidity stress for the non-deferrable class A, B-1 and B-2 notes,
stemming from a large proportion of assets resetting to a semi-annual basis in
any one quarterly period, is addressed by switching the payment frequency on the
notes to semi-annual in this scenario.
Partial Interest Rate Risk
Between 5% and 15% of the portfolio can be invested in fixed rate assets, while
fixed rate liabilities account for 10% of the target par amount.
Limited FX Risk
The transaction is allowed to invest up to 50% of the portfolio in
non-euro-denominated assets, provided they are hedged with perfect asset swaps
within six months of their purchase. Unhedged non-euro assets cannot exceed 2.5%
of the portfolio at any time.
Trading Gain Release
The portfolio manager may designate trading gains as interest proceeds,
providing the portfolio balance remains above the reinvestment target par
balance and the class E overcollateralisation (OC) test remains above its value
at the effective date.
Net proceeds from the note issue will be used to purchase a EUR365m portfolio of
mostly European leveraged loans and bonds. The portfolio will be managed by
Oaktree Capital Management (UK) LLP. The transaction will have a four year
re-investment period scheduled to end in 2018.
The transaction documents may be amended subject to rating agency confirmation
or noteholder approval. Where rating agency confirmation relates to risk
factors, Fitch will analyse the proposed change and may provide a rating action
commentary if the change has a negative impact on the ratings. Such amendments
may delay the repayment of the notes as long as Fitch's analysis confirms the
expected repayment of principal at the legal final maturity.
If in the agency's opinion the amendment is risk-neutral from a rating
perspective Fitch may decline to comment. Noteholders should be aware that
confirmation is considered to be given if Fitch declines to comment.
A 25% increase in the expected obligor default probability would lead to a
downgrade of one to three notches for the rated notes.
A 25% reduction in expected recovery rates would lead to a downgrade of one to
six notches for the rated notes.
Key Rating Drivers and Rating Sensitivities are further described in the
accompanying pre-sale report, which will shortly be available at