OREANDA-NEWS. S&P Global Ratings today raised its ratings on the class B, C, and D notes from Great Lakes CLO 2012-1 Ltd. We also affirmed our ratings on the class A and E notes from the same transaction. (See list.)

Today's rating actions follow our review of the transaction's performance, for which we used data from the Aug. 31, 2016 trustee report.

The upgrades reflect the transaction's $8.83 million in paydowns to the class A notes since the April 2016 trustee report, which we used for our previous rating actions. These paydowns resulted in improved reported overcollateralization (O/C) ratios for all but class E:The class A/B O/C ratio improved to 150.62% from 149.46%.The class C O/C ratio improved to 134.53% from 134.05%.The class D O/C ratio improved to 124.43% from 124.32%.The class E O/C ratio decreased to 112.08% from 112.34%.Additionally, the transaction has benefited from an increase in diversification and a rise in the weighted-average recovery rate of the collateral portfolio. These benefits to the transaction have resulted in more cushion on all tranches.

Although our cash flow analysis indicated a higher rating for the class C notes than the level to which we upgraded it, our rating action considered the increase in defaults and additional sensitivity runs that accounted for exposure to specific distressed assets.

On a standalone basis, the results of the cash flow analysis pointed to a lower rating on the class E notes than today's rating action suggests. However, we believe that the O/C levels will continue to increase as the transaction continues to amortize. In line with this, we affirmed the rating on the class E notes to remain in line with our credit stability framework.

The affirmed ratings 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. In our view, the results of the cash flow analysis demonstrated that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with today's 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 further rating actions as we deem necessary.