OREANDA-NEWS. S&P Global Ratings today raised its ratings on the class A-2A, A-2B, B-1, and B-2 notes and affirmed its ratings on the class A-1, C, D, and E notes from Apidos CLO XV, a U. S. collateralized loan obligation (CLO) transaction that closed in October 2013 and is managed by CVC Credit Partners (see list).

Today's rating actions follow our review of the transaction's performance, using data from the August 2016 trustee report. The transaction is scheduled to remain in its reinvestment period until October 2017.

The upgrades primarily reflect credit quality improvement in the underlying collateral since our effective date rating affirmations in April 2014.

Collateral with an S&P Global Ratings' credit rating of 'BB-' or higher has increased significantly from the January 2014 effective date report used for our previous review. Although the reported weighted average spread has decreased to 3.79% from 4.52% at the effective date, there has been a corresponding increase in the weighted average S&P Global Ratings' recovery rate.

The transaction has also benefited from collateral seasoning, with the reported weighted average life decreasing to 4.50 years from 5.33 years in January 2014. This seasoning, combined with the improved credit quality, has decreased the overall credit risk profile, which, in turn, provided more cushion to the tranche ratings. In addition, the number of issuers in the portfolio has increased during this period, and this resulting portfolio diversification has contributed to the credit quality improvement.

Although there has been a modest increase in both defaulted assets and assets rated in the 'CCC' category, these factors are offset by the decline in the weighted average life and positive credit migration of the collateral portfolio, both of which have lowered the credit risk profile.

According to the August 2016 trustee report that we used for this review, the overcollateralization (O/C) ratios for each class have exhibited mild declines since our April 2014 rating affirmations. The class A O/C ratio was 133.34%, down from 134.48%.The class B O/C ratio was 121.88%, down from 122.92%. The class C O/C ratio was 114.03%, down from 115.01%.The class D O/C ratio was 108.31%, down from 109.23%.However, the current coverage test ratios are all passing and well above their minimum threshold values.

Although our cash flow analysis indicated higher ratings for the class B-1, B-2, C, and D notes, our rating actions consider additional sensitivity runs that considered the exposure to specific distressed industries and allowed for volatility in the underlying portfolio given that the transaction is still in its reinvestment period.

The affirmations of the ratings on the class A-1, C, D, and E notes reflect our belief that the credit support available is commensurate with the current rating levels.

Our review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the aforementioned trustee report, to estimate future performance. In line with our criteria, our cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, and recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in our view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with these rating actions.

We will continue to review whether, in our view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and will take rating actions as we deem necessary.