S&P: Ratings Raised In Carlyle Global Market Strategies Euro CLO 2013-1 Following The End Of The Reinvestment Period
Carlyle Global Market Strategies Euro CLO 2013-1 completed its three-year reinvestment period on Aug. 15, 2016. S&P Global Ratings does not typically consider upgrades in a collateralized loan obligation (CLO) transaction during its reinvestment period as the collateral manager can change the credit risk profile of the transaction. The class A notes have now started to pay down as the collateral in the transaction amortizes. Following the end of the reinvestment period, the collateral manager can only reinvest unscheduled principal proceeds (e. g., prepayments) and sale proceeds from the sale of credit impaired or credit improved assets if it maintains certain credit parameters (e. g., an equal or higher rating from S&P Global Ratings and the same or earlier stated maturity of the substitute asset).
Today's rating actions follow our assessment of the transaction's performance, using data from the August 2016 trustee report, following the end of the transaction's reinvestment period.
Since closing, the collateral performance and the weighted-average spread earned on the assets have been stable. As the portfolio continues to amortize, we expect a reduction in the notes' weighted-average life.
All par-value, interest coverage, portfolio profile, and collateral quality tests are passing. The weighted-average rating of the collateral is 'B', with a small proportion of assets rated in the 'CCC' category (2.98%). There are currently no defaulted and no non-euro-denominated assets in the portfolio.
We incorporated various cash flow stress scenarios using our standard default patterns and timings for each rating category assumed for each class of notes, combined with different interest stress scenarios as outlined in our corporate cash flow collateralized debt obligation (CDO) criteria (see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Aug. 8, 2016).
Under our structured finance ratings above the sovereign criteria (RAS criteria), we consider the transaction's exposure to country risk to be limited at the assigned rating levels (see "Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions," published on Aug. 8, 2016). The exposure to individual sovereigns does not exceed the diversification thresholds outlined in our RAS criteria.
In light of the above developments, we believe the available credit enhancement for the rated classes of notes is commensurate with higher ratings than those currently assigned. Therefore, we have raised our ratings on the class B-1, B-2, C-1, C-2, D-1, D-2, and E notes.
The available credit enhancement for the class A notes is commensurate with the currently assigned rating. Therefore, we have affirmed our 'AAA (sf)' rating on these notes.
Carlyle Global Market Strategies Euro CLO 2013-1 is a cash flow CLO transaction that securitizes loans granted to primarily speculative-grade corporate firms. The transaction closed on June 17, 2013 and its reinvestment period ended on Aug. 15, 2016.