Fitch Rates THL Credit Wind River 2015-2 CLO Ltd./LLC
OREANDA-NEWS. Fitch Ratings assigns the following ratings to THL Credit Wind River 2015-2 CLO Ltd./LLC:
--$230,400,000 class A-1 notes 'AAAsf'; Outlook Stable;
--$47,350,000 class A-2 notes 'AAAsf'; Outlook Stable.
Fitch does not expect to rate the class B, C, D, E, F, or subordinated notes.
THL Credit Wind River 2015-2 CLO Ltd. (issuer) and THL Credit Wind River 2015-2 CLO LLC (co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by THL Credit Senior Loan Strategies LLC. Net proceeds from the issuance of the secured notes and subordinated notes will be used to purchase a portfolio of approximately $435 million primarily senior secured leveraged loans. The CLO will have an approximately four-year reinvestment period and two-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 36.1% for class A-1 and A-2 notes (together, the class A notes), in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE available to the class A notes is lower than the average CE of recent CLO issuances; however, cash flow modeling indicates performance in line with other 'AAAsf' Fitch-rated CLO notes.
'B' Asset Quality: The average credit quality of the indicative portfolio is 'B', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch's opinion, class A notes are unlikely to be affected by the foreseeable level of defaults. Class A notes are projected to be able to withstand default rates of up to 64.9%.
Strong Recovery Expectations: The indicative portfolio consists of 97.9% senior secured loans. Approximately 93.8% of the indicative portfolio has strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher and the base case recovery assumption is 78.2%. In determining ratings for class A 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 stresses resulting in a 38.1% recovery rate assumption in Fitch's 'AAAsf' scenario.
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-1 and A-2 notes to remain investment grade even under the most extreme sensitivity scenarios; results under these sensitivity scenarios ranged between 'A+sf' and 'AAAsf' for these classes.
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.