OREANDA-NEWS. S&P Global Ratings today raised its credit ratings on Theseus European CLO S. A.'s class C, D, and E notes. At the same time, we have affirmed our rating on the class B notes (see list below).

Today's rating actions follow our review of the transaction's performance. We performed a credit and cash flow analysis using data from the August 2016 trustee report.

We subjected the capital structure to a cash flow analysis to determine the break-even default rate for each rated class of notes at each rating level. In our analysis, we used the reported portfolio balance that we considered to be performing (€71.0 million), the weighted-average spread (3.75%), and the weighted-average recovery rates for the performing portfolio. We applied various cash flow stress scenarios, using our standard default patterns in conjunction with different interest stress scenarios for each liability rating category. We have also applied our structured finance ratings above the sovereign criteria (see "Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions," published on Aug. 8, 2016).

From our analysis, we have observed that the available credit enhancement has increased for all of the rated classes of notes, due to the deleveraging of the senior notes after the end of the transaction's reinvestment period in August 2012. The class A notes have fully repaid since our previous review (see "Ratings Raised On European Cash Flow CLO Transaction Theseus European CLO's Class B To E Notes Following Review," published on July 6, 2015).

Our analysis indicates that the available credit enhancement for the class B notes is commensurate with their currently assigned rating. We have therefore affirmed our 'AAA (sf)' rating on the class B notes.

We have raised to 'AAA (sf)' from 'AA+ (sf)' our rating on the class C notes as our credit and cash flow results show that the available credit enhancement is now commensurate with this rating level.

Our credit and cash flow results show that the available credit enhancement for the class D notes is now commensurate with a higher rating. Our supplemental tests in our corporate collateralized debt obligation (CDO) criteria constrain this rating at 'A+ (sf)' (see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Aug. 8, 2016). However, the failure of this test at the next rating level is marginal at approximately €21,000. To test the reliance of this tranche on excess spread, we have run our spread compression sensitivity, also outlined in our criteria. Based on our standard break-even default rate (BDR) results and the result of this sensitivity test, we have raised to 'AA - (sf)' from 'A - (sf)' our rating on the class D notes to recognize both the increased credit enhancement and the cash flow that this tranche benefits from.

Our credit and cash flow results indicate that the available credit enhancement for the class E notes is now commensurate with a higher rating. However, our supplemental tests constrain our rating on this class of notes. Accordingly, we have raised to 'BB+ (sf)' from 'BB (sf)' our rating on this class of notes.

Theseus European CLO is a cash flow collateralized loan obligation (CLO) transaction that securitizes loans granted to primarily European speculative-grade corporate firms. INVESCO Senior Secured Management Inc. manages the transaction. The transaction closed in August 2006 and entered its amortization period in August 2012.