OREANDA-NEWS. Fitch Ratings has assigned Cairn CLO VI B. V.'s notes expected ratings, as follows:

EUR212m class A: 'AAA(EXP)sf'; Outlook Stable

EUR42.1m class B: 'AA(EXP)sf'; Outlook Stable

EUR19.6m class C: 'A(EXP)sf'; Outlook Stable

EUR17.15m class D: 'BBB(EXP)sf'; Outlook Stable

EUR24m class E: 'BB(EXP)sf'; Outlook Stable

EUR8.7m class F: 'B-(EXP)sf'; Outlook Stable

EUR39.38m subordinated notes: not rated

Final ratings are contingent on the receipt of final documentation conforming to information already received.

Cairn CLO VI B. V. (the issuer) is a cash flow collateralised loan obligation (CLO).

KEY RATING DRIVERS

'B'/'B-' Portfolio Credit Quality:

Fitch expects the average credit quality of obligors to be in the 'B'/'B-' range. Fitch has public ratings or credit opinions on 84 of the 85 assets in the identified portfolio. The Fitch weighted average rating factor of the identified portfolio is 29.71, below the maximum covenant for assigning the expected ratings of 33.29.

High Recovery Expectations:

At least 90% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. Fitch has assigned Recovery Ratings (RRs) to 84 of the 85 assets in the identified portfolio. The Fitch weighted average recovery rate of the identified portfolio is 69.74%, above the minimum covenant for assigning final ratings of 68.12%.

Diversified Asset Portfolio:

The covenanted maximum exposure to the top 10 obligors for assigning the expected ratings is 20% of the portfolio balance. This covenant ensures that the asset portfolio will not be exposed to excessive obligor concentration.

Unhedged Non-Euro Assets Exposure:

The transaction is allowed to invest up to 5% of the portfolio in non-euro-denominated fixed rate assets. Unhedged non-euro assets are limited to a maximum exposure of 5% of the portfolio subject to principal haircuts. The manager can only invest in unhedged assets if after the applicable haircuts the aggregate balance of the assets is above the reinvestment target par balance.

TRANSACTION SUMMARY

Net proceeds from the issuance of the notes will be used to purchase a EUR350m portfolio of mostly European leveraged loans and bonds. The portfolio is to be managed by Cairn Loan Investments LLP. The transaction includes a four-year reinvestment period.

The transaction documents may be amended, subject to rating agency confirmation or noteholder approval. Where rating agency confirmation relates to risk factors, Fitch will analyse the proposed change and may provide a rating action commentary if the change has a negative impact on the ratings. Such amendments may delay the repayment of the notes as long as Fitch's analysis confirms the expected repayment of principal at the legal final maturity.

If in the agency's opinion the amendment is risk-neutral from a rating perspective Fitch may decline to comment. Noteholders should be aware that confirmation is considered to be given if Fitch declines to comment.

Fitch's "Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds," dated May 2016, includes stresses to address the risk of negative interest rates in structured finance transactions. European CLOs are unlikely to be affected by negative interest rates due to the prevalence of Euribor floors in the European loan market. Therefore, we applied the standard (positive) interest rate downward stresses in our analysis.

RATING SENSITIVITIES

A 25% increase in the obligor default probability could lead to a downgrade of up to two notches for the rated notes while a 25% reduction in expected recovery rates could lead to a downgrade of up to three notches for the rated notes.

Fitch published an exposure draft of its Counterparty Criteria for Structured Finance and Covered Bonds on 14 April 2016. The exposure draft serves as the operative criteria report for this ratings analysis. Under the exposure draft, a direct-support counterparty is expected to maintain a Long-Term rating of at least 'A' or a Short-Term rating of at least 'F1' in order to support note ratings of up to 'AAAsf'. The issuer's account holder, Elavon Financial Services Limited (Elavon; AA/Stable/F1+), satisfies the minimum expected ratings threshold for a direct-support counterparty under the exposure draft framework.

Fitch's existing counterparty criteria (dated 14 May 2014), as well as the issuer's governing documents, expect this role to be fulfilled by an institution with a Long-Term rating of at least 'A' and a Short-Term rating of at least 'F1'. Elavon has Long-Term and Short-Term ratings that currently meet these expectations. Therefore the ratings for class A notes remain achievable under Fitch's existing criteria.

The framework regarding expectations for qualified investments has not materially changed between the existing criteria and the exposure draft

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

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 asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

REPRESENTATIONS AND WARRANTIES

A description of the transaction's Representations, Warranties and Enforcement Mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool was not prepared for this transaction. Offering documents for EMEA leveraged finance CLOs typically do not include RW&Es that are available to investors and that relate to the asset pool underlying the CLO. Therefore, Fitch credit reports for EMEA leveraged finance CLO offerings will not typically include descriptions of RW&Es.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, which will shortly be available at www. fitchratings. com.

SOURCES OF INFORMATION

The information below was used in the analysis.

- Loan-by-loan data provided by the arranger as at 7 June 2016

- Offering circular provided by the arranger as at 27 May 2016