Fitch Affirms CIFC Funding 2014-IV, Ltd. /LLC
KEY RATING DRIVERS
The affirmations are based on the stable performance of the underlying portfolio since closing in September 2014 and the sufficient credit enhancement (CE) available to the notes. As of the Feb. 4, 2015 trustee report, the transaction continues to pass all coverage tests and collateral quality tests, and there have been no defaults in the underlying portfolio to date.
The loan portfolio par amount plus principal cash in CIFC 2014-IV is approximately \$601.6 million, compared to the effective date target balance of \$600 million. The current weighted average spread (WAS) is reported to be 4.8% versus a minimum WAS trigger of 4.5%. Additionally, the weighted average rating factor has remained unchanged at 'B' since closing. Fitch currently considers 3.6% of the portfolio (excluding cash) rated in the 'CCC' category, versus 3.3% at closing, based on Fitch's Issuer Default Rating (IDR) Equivalency Map. The portfolio is diversified with 220 obligors, and invested in 98.4% senior secured loans with 1.6% second lien loans. Currently, 92.0% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.
Fitch's cash flow analysis indicates that the CE provided to the notes is sufficient to support the notes at their current rating levels. The Stable Outlooks reflect the expectation that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio.
The ratings of the notes may be sensitive to the following: asset defaults beyond 'AAAsf' level stresses, significant negative credit migration, lower than historically observed recoveries for defaulted assets, and breaches of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of CIFC 2014-IV, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities.
CIFC 2014-IV is an arbitrage, cash flow collateralized loan obligation (CLO) managed by CIFC Asset Management LLC. The transaction remains in its reinvestment period, which is scheduled to end in October 2018.
This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using Fitch's Portfolio Credit Model (PCM) to project future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various combinations of default timing and interest rate stress scenarios, as described in the report. The cash flow model was customized to reflect the transaction's structural features.
Initial Key Rating Drivers and Rating Sensitivity are further described in the presale report published on Aug. 1, 2014. A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that asset class is also available by accessing the reports and links indicated below.
Fitch has affirmed the following ratings:
--\$353,000,000 class A-1 notes 'AAAsf'; Outlook Stable.
--\$25,000,000 class A-2 notes 'AAAsf'; Outlook Stable.
Fitch does not rate the class B-1, B-2, C-1, C-2, D, E, F or subordinated notes.