(The following statement was released by the rating agency)
Dec 05 -
-- We have reviewed Gresham Capital CLO V’s performance.
-- Following our review, we have raised our rating on the class B notes.
-- At the same time, we have lowered our rating on the class D notes and affirmed our ratings on the class A and C notes.
-- Gresham Capital CLO V is a cash flow CLO transaction that closed in June 2008. Its reinvestment period ends in July 2014.
Standard & Poor’s Ratings Services today took various credit rating actions on all of Gresham Capital CLO V B.V.’s rated classes of notes.
Specifically, we have:
-- Raised our rating on the class B notes;
-- Lowered our rating on the class D notes; and
-- Affirmed our ratings on the class A and C notes (see list below).
Today’s rating actions follow our assessment of the transaction’s performance using data from the latest available trustee report, dated Oct. 18, 2012.
We subjected the capital structure to a cash flow analysis to determine the break-even default rate for each rated class at each rating level. In our analysis, we used the reported portfolio balance that we consider to be performing (EUR254,155,811), the current weighted-average spread (3.30%), and the weighted-average recovery rates that we considered appropriate. We incorporated various cash flow stress scenarios using alternative default patterns, and levels, in conjunction with different interest and currency stress scenarios.
From our analysis, we have observed that EUR140.6 million of the class A notes have paid down since our last review in October 2011. In our view, this has increased the credit enhancement available to the class A, B, and C notes. We have also observed that the credit quality of the pool has worsened since our last review.
During our review, we observed that non-euro-denominated assets made up 27.58% of the aggregate collateral balance. These assets are hedged under a cross-currency swap agreement. In our cash flow analysis, we considered scenarios where the hedging counterparty does not perform and where the transaction is therefore exposed to changes in currency rates.
Our credit and cash flow analysis of the class B notes indicated that the level of credit enhancement is commensurate with a higher rating than previously assigned. We have therefore raised to ‘BBB+ (sf)’ from ‘BBB (sf)’ our rating on the class B notes.
We have lowered to ‘CCC- (sf)’ from ‘CCC+ (sf)’ our rating on the class D notes because our rating is constrained by the application of the largest obligor default test. This is a supplemental stress test that we introduced in our 2009 criteria update for corporate collateralized debt obligations (CDOs) (see “Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs,” published on Sept. 17, 2009). The results of our stress test showed that the level of credit enhancement available to the class D notes would be limited if the largest obligor were to default, when we assumed a recovery rate of 5%.
In our opinion, the credit enhancement available to the class A notes is consistent with their current rating, taking into account the results of our credit and cash flow analysis and the application of our 2012 counterparty criteria (see “Counterparty Risk Framework Methodology And Assumptions,” published on Nov. 29, 2012). We have therefore affirmed our ‘AA- (sf)’ rating on the class A notes.
Our rating on the class C notes is lower than the ratings on any of the counterparties in the transaction. Therefore, applying our 2012 counterparty criteria would not constrain the rating on the notes. We have affirmed our ‘B+ (sf)’ rating on the class C notes because our analysis indicates that the credit enhancement available to these notes is consistent with the rating currently assigned and remains constrained by the largest obligor test.
Gresham Capital CLO V is a cash flow collateralized loan obligation (CLO) transaction that securitizes loans to primarily speculative-grade corporate firms. The transaction closed in June 2008 and is managed by Investec Principal Finance.
-- Counterparty Risk Framework Methodology And Assumptions, Nov. 29, 2012
-- Credit Rating Model: CDO Evaluator 6.0, March 19, 2012
-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012
-- Transaction Update: RMF Euro CDO IV PLC, Dec. 22, 2011
-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
-- Ratings Affirmed On All Classes Of Notes In RMF Euro CDO IV Following Review, Oct. 18, 2011
-- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions, June 14, 2011
-- Credit Rating Model: Extreme Value Theory Foreign Exchange Model, Aug. 17, 2010
-- Credit Rating Model: S&P Cash Flow Evaluator, Aug. 17, 2010
-- 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
-- Understanding Standard & Poor’s Rating Definitions, June 3, 2009
-- General Cash Flow Analytics for CDO Securitizations, Aug. 25, 2004
Gresham Capital CLO V B.V.
EUR518.825 Million Floating-Rate and Subordinated Deferrable Secured
B BBB+ (sf) BBB (sf)
D CCC- (sf) CCC+ (sf)
A AA- (sf)
C B+ (sf)