Fitch Affirms Harbourmaster Pro-Rata CLO 2 B.V.
Class A1VF: affirmed at 'AAAsf'; Outlook Stable
Class A1T: affirmed at 'AAAsf'; Outlook Stable
Class A2: affirmed at 'AA+sf'; Outlook revised to Stable from Negative
Class A3: affirmed at 'A-sf'; Outlook revised to Stable from Negative
Class A4E: affirmed at 'BBBsf'; Outlook revised to Stable from Negative
Class A4F: affirmed at 'BBBsf'; Outlook revised to Stable from Negative
Class B1E: affirmed at 'BB+sf'; Outlook revised to Stable from Negative
Class B1F: affirmed at 'BB+sf'; Outlook revised to Stable from Negative
Class B2: affirmed at 'Bsf'; Outlook Negative
Class S1: affirmed at 'BB+sf'; Outlook revised to Stable from Negative; rating withdrawn
Class S4: affirmed at 'BBBsf'; Outlook revised to Stable from Negative; rating withdrawn
Harbourmaster Pro-Rata CLO 2 B.V. is a securitisation of mainly European senior secured loans with the total EUR602m note issuance invested in a target portfolio of EUR587.5m. The portfolio is actively managed by Blackstone/GSO Debt Funds Europe Limited.
KEY RATING DRIVERS
The affirmation reflects the transaction's stable performance over the past year. The revision of the Outlook on the class A2 to B1 notes to Stable from Negative reflects the increase in credit enhancement and deleveraging of the transaction following the end of the reinvestment period in October 2013.
Credit enhancement has increased for all rated notes since the last review in November 2014 due to the transaction's rapid deleveraging. The senior notes have paid down by approximatively EUR158m and credit enhancement has increased to 65.3% from 45.8% for the class A1 notes and to 30.9% from 22.3% for the class A2 notes.
The reinvestment period ended in October 2013 but the collateral manager was able to reinvest unscheduled proceeds until the payment date failing in October 2015. During the past year, the collateral manager purchased approximatively EUR75m of additional assets around par. As a consequence of these additional purchases, the weighted average life of the portfolio remains stable at four years.
The Fitch weighted average rating factor, as calculated by the trustee, has decreased to 29.1 from 29.7 over the past year and the Fitch weighted average recovery rate has increased to 72.4 from 70.9. There are currently no defaulted assets in the portfolio and two assets, representing approximatively 1.7% of the portfolio, are rated 'CCC' by Fitch. The slight increase in credit quality was compensated by an increase in portfolio concentration due to deleveraging. The largest obligor now represents 4.39% of the portfolio, up from 3.93% as of the last review while the top 10 obligors have increased to 38.16% from 32.65%.
Currently there are no revolving or delayed drawdown notes in the portfolio. Of the portfolio, 15.2% is non-euro-denominated. However, only 1.6% is hedged by the variable funding note and the remainder is hedged by currency swaps that meet Fitch's counterparty criteria. The transaction documents allowed for up to EUR88.1m of the portfolio notional to be invested in non-euro-denominated revolving assets, or delayed drawdown notes. Any investment or drawings would be matched by a corresponding drawing on the multi-currency variable funding A1VF note.
As of October 2015 payment date report, all the coverage tests, portfolio profile tests and collateral quality tests are passing.
Fitch has affirmed and withdrawn the ratings on the class S1 and S4 combination notes. These notes were exchanged for their components and thus no longer exist.
In its rating sensitivity analysis, Fitch found that a 25% increase of the default probability would result in downgrade of between one and two notches across all notes apart from the class A1 notes, which would be unaffected. A 25% reduction of the recovery rate would result in a downgrade of between one and three notches across all notes apart from the class A1 notes, which would be unaffected.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
-Loan-by-loan data provided by Deutsche Bank as at 08 October 2015
-Transaction reporting provided by Deutsche Bank as at 08 October 2015.