(Repeat for additional subscribers)
June 7 (The following statement was released by the rating agency)
Fitch Ratings has published the 'A' rating, Stable
Outlook, assigned to Ver Capital Credit Opportunity Fund's (VCCOF) term loan
VCCOF is a closed end fund managed by Ver Capital SGRpA (Ver Cap).
KEY RATING DRIVERS
--The portfolio risk profile and its static nature
-- The leverage and deleveraging mechanisms
--The structural protections of the fund and term loan facility agreement
--The legal and regulatory parameters that govern the funds' operations
-- The depositary bank's rating Societe Generale ('A+'/Negative/ 'F1+')
-- The terms and conditions of term loan term loan facility
--The capabilities of Ver Cap as an investment advisor.
ASSET PORTFOLIO AND LEVERAGE
As of end March 2013, VCCOF total assets were approximately EUR50.6m and total
leverage consisted of the rated TLF of EUR21.1m (41% of total assets). The TLF
expires in June 2018, with an extension option until June 2019 at the asset
manager's discretion. The TLF is repaid with the proceeds of the assets, so that
the fund will deleverage over time.
As at March 2013, the portfolio consisted of around 50% European leveraged loans
and 50% high yield bonds (84% of the entire portfolio is senior secured). All of
the 28 issuers have a credit quality consistent with a 'B-' and above rating.
The fund's leverage and portfolio composition is consistent with loss scenarios
under a 'AA' stress. All the assets are pledges in favour of the lenders.
23% of the assets mature after the legal maturity date of the loan facility. As
such were the manager not to elect to extend there would be a liquidation of
long dated assets. All assets mature before the extended maturity of the fund
debt (i.e. before June 2019). Therefore, Fitch considers market value risk is
limited as ultimate repayment of the loan is not dependent on the liquidation of
STRUCTURAL AND LEGAL PROTECTIONS
Asset coverage ratio and interest coverage ratios are calculated on a
semi-annual basis and were met as at December 2012. Non-financial covenants
include a prohibition of any additional indebtedness. Events of defaults and
fund liquidation provisions provide additional protection to lenders. Terms and
covenants of the loan are deemed appropriate given the rating level.
VCCOF is a closed end fund regulated and registered in Italy. Equity commitments
have been fully drawn. The portfolio is static, since the reinvestment period
expired in February 2013.
The fund's custodian and depositary bank is Societe Generale Securities Services
spa, a subsidiary of Societe Generale since February 2013, from Istituto
Centrale Banche Popolari Italiana (unrated by Fitch) and previously Banca
dell'Emilia Romagna ('BBB'/Negative/'F3'). Whilst the fund's assets and deposit
accounts are segregated, timeliness and recovery can be affected by a credit
event on Societe Generale. Therefore, the TLF rating is sensitive to that of
The fund expires in August 2018, with an extension option until August 2021 at
the asset manager's discretion. The fund has various name, country, industry
diversification limits, which are consistent with the rating level.
Established in 2006, Ver Cap is authorised by the Bank of Italy and by the
Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. The
company manages EUR167m as at end April 2013, invested in European leveraged
loans and high yield bonds. The company employs six people and has outsourced
operations and control functions. Ver Cap is owned by management (20%) and five
Italian financial institutions (80%) that all have a minority share. Fitch
considers Ver Cap a suitable asset manager for the fund.
The assigned ratings may be sensitive to material changes in the leverage
composition, portfolio credit quality or market risk of the fund as well as
breach of covenants, failure of the asset manager, rating of the depositary
bank, among others. A material adverse deviation from Fitch guidelines for any
key rating driver could cause the rating to be downgraded by Fitch.
For additional information about Fitch's rating guidelines applicable to debt
and preferred stock issued by closed-end funds, please review the criteria
referenced below, which can be found on Fitch's web site at