S&P: BlueMountain CLO 2012-2 Ltd. Ratings Raised On Three Classes; Four Ratings Affirmed
Today's rating actions follow our review of the transaction using data from the June 30, 2016, trustee report. The transaction is scheduled to remain in its reinvestment period until Nov. 21, 2016.
The transaction has experienced an increase in assets rated 'CCC+' and below since the February 2013 effective date report, though this has been partially offset by a significant increase in assets rated 'BB-' and above. Additionally, par gain in the underlying portfolio since the effective date has led to a small increase in the overcollateralization (O/C) ratios according to the June 2016 trustee report:
The class A/B O/C ratio was 134.51%, up slightly from 134.44%.The class C O/C ratio was 121.33%, up slightly from 121.27%. The class D O/C ratio was 114.43%, up slightly from 114.37%.The class E O/C ratio was 109.22%, up slightly from 109.16%.The reinvestment O/C ratio was 109.22, up slightly from 109.16%.The upgrades primarily reflect the transaction's relatively stable performance as it approaches its amortization phase after November 2016. The affirmations on the class A-1, A-2, D, and E notes reflect our belief that the credit support available is commensurate with the current rating levels.
Our review of the transaction relied, in part, upon a criteria interpretation with respect to our May 2014 criteria, "CDOs: Mapping A Third Party's Internal Credit Scoring System To Standard & Poor's Global Rating Scale," which allows us to use a limited number of public ratings from other Nationally Recognized Statistical Rating Organizations (NRSROs) to assess the credit quality of assets not rated by S&P Global Ratings. The criteria provide specific guidance for the treatment of corporate assets not rated by S&P Global Ratings, while the interpretation outlines the treatment of securitized assets.
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 this rating action.
S&P Global Ratings will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary.