Fitch Rates Voya CLO 2015-3, Ltd./LLC
--\\$468,400,000 class A-1a notes 'AAAsf'; Outlook Stable;
--\\$0 class A-1b notes 'AAAsf'; Outlook Stable;
--\\$50,000,000 class A-1 loans 'AAAsf'; Outlook Stable;
--\\$89,400,000 class A-2 notes 'AAsf'; Outlook Stable.
Fitch does not rate the class B, C, D-1, D-2, E or subordinated notes.
Voya CLO 2015-3, Ltd. (the issuer) and Voya CLO 2015-3, LLC (the co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Voya Alternative Asset Management LLC (VAAM). Net proceeds from the issuance of notes and incurrence of the class A-1 loans will be used to purchase a portfolio of about \\$800 million of primarily senior secured leveraged loans. The CLO will have a five-year reinvestment period and a two-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 35.2% for class A-1a and A-1b notes and class A-1 loans (together, the class A-1 debt) and of 24% for class A-2 notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' and the 'AAsf' stress scenarios, respectively. The degree of CE available to class A-1 debt and class A-2 notes is lower than the average CE for recent 'AAAsf' and 'AAsf' CLO issuances, respectively.
'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is slightly better than that of recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch's opinion, class A-1 debt and class A-2 notes are unlikely to be affected by the foreseeable level of defaults. Class A-1 debt and class A-2 notes are robust against default rates of up to 59.2% and 55.1%, respectively.
Strong Recovery Expectations: The indicative portfolio consists of 96.1% first lien senior secured loans. Approximately 88.4% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher and the base case recovery assumption is 77.3%.
In determining the ratings for class A-1 debt and A-2 notes, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions, resulting in recovery rates of 36.6% and 44.7% in Fitch's 'AAAsf' and 'AAsf' scenarios, respectively.
Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. Fitch expects the class A-1a and A-1b notes and class A-1 loans to remain investment grade and the class A-2 notes to remain within three rating categories of its assigned rating even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'A-sf' and 'AAAsf' for the class A-1a and A-1b notes and class A-1 loans and 'BB+sf' and 'AAsf' for the class A-2 notes.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available shortly to investors on Fitch's website at 'www.fitchratings.com'.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
The publication of a RW&Es appendix is not required for this transaction.