OREANDA-NEWS. S&P Global Ratings today assigned its preliminary ratings to the class A-1-R, A-2-R, B-R, C-R, and D-R floating-rate replacement notes from Magnetite VII Ltd., a collateralized loan obligation (CLO) originally issued in 2012 that is managed by Blackrock Financial Management Inc. The replacement notes will be issued via a proposed supplemental indenture.

We previously raised our ratings on the class A-2A, A-2B, and B notes from Magnetite VII Ltd. in May 2016 to reflect improved overcollateralization ratios and stable portfolio credit quality.

Today's rating actions follow our review of the transaction's performance using data from the July 29, 2016, trustee report.

The preliminary ratings reflect our opinion that the credit support available is commensurate with the associated rating levels. With the exception of the class D-R notes, the floating-rate replacement notes are generally expected to be issued at a lower spread over LIBOR than the original notes (see table).

On the Oct. 17, 2016, refinancing date, the proceeds from the issuance of the replacement notes are expected to redeem the original notes. At that time, we anticipate withdrawing the ratings on the original notes and assigning final ratings to the replacement notes. In addition, at that time, the rating on current unfunded class A-1 senior notes will be withdrawn, as the class will no longer be able to fund following the refinancing of the transaction. However, if the refinancing doesn't occur, we may affirm the rating on the original notes and withdraw our preliminary ratings on the replacement notes.

The replacement notes are being issued via a proposed supplemental indenture, which, in addition to outlining the terms of the replacement notes, will also: Extend the reinvestment period to Jan. 15, 2019;Extend the non-call period to Jan. 15, 2018;Extend the weighted average life test to Oct. 17, 2022; Adopt the non-model version of the CDO Monitor application; andIncorporate the recovery rate methodology and updated industry classifications outlined in our August 2016 CLO criteria update (see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Aug. 8, 2016).There is no anticipated change to the transaction's legal final maturity date.

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 (see table). 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 or ultimate principal, or both, to each of the rated tranches.