S&P: All Ratings Raised In Cordatus Loan Fund II Following Performance Review
Today's rating actions follow our credit and cash flow analysis of the transaction using data from the latest available trustee report and the application of our relevant criteria (see "Related Criteria").
The trustee report shows that the transaction's overcollateralization tests are passing at higher levels than at our previous review and that the reported weighted-average spread has remained relatively stable since then (see "VariousRating Actions Taken In European Cash Flow CLO Transaction Cordatus Loan Fund II Following Review," published July 28, 2014). Our analysis further shows that the transaction does not currently hold any defaulted assets (i. e., debt obligations of obligors rated 'CC', 'SD' [selective default], or 'D'). At our previous review, defaulted assets totaled 3.0% of the portfolio's performing balance.
From our analysis, we have observed a decrease in the portfolio's weighted-average maturity and a positive ratings migration within the portfolio. As a result, our analysis indicates that overall developments have resulted in lower scenario default rates across all rating levels.
We have subjected the transaction's capital structure to a cash flow analysis to determine the break-even default rate for each rated class. In our analysis, we used the portfolio balance that we considered to be performing (i. e., of assets rated 'CCC-' or above), the reported weighted-average spread, and the weighted-average recovery rates that we considered to be appropriate. We incorporated various cash flow stress scenarios using our standard default patterns, levels, and timings for each rating category assumed for each class of notes, in conjunction with different interest-rate and exchange-rate stress scenarios.
Based on our analysis above, we now consider that the available credit enhancement for all classes of notes is commensurate with higher ratings than previously assigned, and have raised our ratings accordingly.
Cordatus Loan Fund II is a cash flow collateralized loan obligation (CLO) transaction that securitizes loans to primarily speculative-grade corporate firms. The transaction closed in July 2007 and is managed by CVC Cordatus Group Ltd.