S&P: OCP CLO 2013-4 Ltd. Ratings Raised On One Class; Six Ratings Affirmed
Today's rating actions follow our review of the transaction's performance, using data from the Aug. 14, 2016, trustee report. The transaction is scheduled to remain in its reinvestment period until October 2017.
The transaction has benefited from collateral seasoning, with the reported weighted average life decreasing to 4.37 years from 5.55 years in December 2013. This seasoning, combined with the improved credit quality, has decreased the overall credit risk profile, which, in turn, provided more cushion to the tranche ratings.
Collateral with an S&P Global Ratings' credit rating of 'BB-' or higher has increased from the Dec. 17, 2013, effective date report used for our previous review.
Though there has been a modest increase in assets rated in the 'CCC' category, this is offset by the decline in the weighted average life and positive credit migration of the collateral portfolio.
Although our cash flow analysis indicated higher ratings for the class A-2, B, C, and D notes, our rating actions consider additional sensitivity runs that considered the exposure to specific distressed industries and allowed for volatility in the underlying portfolio given that the transaction is still in its reinvestment period.
On a standalone basis, the results of the cash flow analysis indicated a lower rating on the class E notes than today's rating action reflects. However, we affirmed the rating on class E after considering the margin of failure, its overcollateralization ratio, which, despite a relatively minor decline since the transaction's effective date, is still well-above its trigger, and that the transaction will soon enter its amortization phase. Based on the latter, we expect the credit support available to all rated classes to increase as principal is collected and paydowns to the senior notes occur.
The affirmations of the ratings on the class A-1A, A-1B, B, C, D, and E notes reflect our belief that the credit support available is commensurate with the current rating levels.
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.