S&P: Landmark VIII CLO Ltd. Ratings Raised On Three Classes; Three Ratings Affirmed
Today's rating actions follow our review of the transaction's performance using data from the July 8, 2016, trustee report.
The upgrades reflect the transaction's $75.48 million in paydowns to the class A-1 notes since our January 2014 rating actions. These paydowns resulted in improved reported overcollateralization (O/C) ratios since the November 2013 trustee report, which we used for our previous rating actions:The class A/B O/C ratio increased to 158.08% from 149.73%.The class C O/C ratio increased to 132.35% from 128.80%.The class D O/C ratio increased to 117.70% from 116.37%.The class E O/C ratio increased to 108.46% from 108.32%.The transaction has also benefited from collateral seasoning, as the reported weighted average life has declined to 2.82 years from 3.90 years as of our previous rating actions, decreasing the risk profile of the underlying portfolio.
The affirmations of the 'AAA (sf)' ratings on the class A-1, A-2, and B notes reflect our view that the credit support available is commensurate with the current rating level.
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 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.