OREANDA-NEWS. Fitch Ratings expects to assign the following ratings and Rating Outlooks to Sound Point CLO XII Ltd./LLC:

--$5,250,000 class X notes 'AAAsf', Outlook Stable;

--$451,500,000 class A notes 'AAAsf', Outlook Stable;

--$55,500,000 class B-1 notes 'AAsf', Outlook Stable.

Fitch does not expect to rate the class B-2, C, D, or E notes or the subordinated notes.

TRANSACTION SUMMARY

Sound Point CLO XII, Ltd. (the issuer) and Sound Point CLO XII, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) managed by Sound Point Capital Management, LP (Sound Point). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of $700 million of primarily senior secured leveraged loans. The CLO will have an approximately four-year reinvestment period and a two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 35.5% for class A notes and 24% for class B-1 notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' and 'AAsf' stress scenarios, respectively. The degree of CE available to class A notes is below the average CE of recent 'AAAsf' CLO notes; however, cash flow modeling indicates performance in line with other Fitch-rated 'AAAsf' CLO notes. CE available to class B-1 notes is in line with the average CE of recent 'AAsf' CLO notes. Class X notes are expected to be paid in full from the application of interest proceeds via the interest waterfall.

'B+' Asset Quality: The average credit quality of the indicative portfolio is 'B+', which is a relatively higher average credit quality than recent CLOs, where the average credit quality is typically closer to 'B'. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch's opinion, class X, A and B-1 notes are unlikely to be affected by the foreseeable level of defaults. Class X, A and B-1 notes are projected to be able to withstand default rates of up to 100%, 62.4% and 56.1%, respectively.

Strong Recovery Expectations: The indicative portfolio consists of 96.6% first lien senior secured loans. Approximately 92.8% 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 77.9%. In determining the notes' ratings, 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 39.4% and 48% recovery rates in Fitch's 'AAAsf' and 'AAsf' scenarios, respectively.

RATING SENSITIVITIES

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 X, A and B-1 notes to remain investment grade, even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios were 'AAAsf' for class X notes, ranged between 'AAsf' and 'AAAsf' for the class A notes, and ranged between 'BBB+sf' and 'AAAsf' for the class B-1 notes.

Fitch published an exposure draft of its Counterparty Criteria for Structured Finance and Covered Bonds on April 14, 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, U. S. Bank National Association, satisfies the minimum expected ratings threshold for a direct-support counterparty under the exposure draft framework.

Fitch's existing counterparty criteria (dated May 14, 2014), as well as the issuer's governing documents, expects 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'. U. S. Bank's long-term and short-term ratings currently meet this expectation. Therefore, the ratings for class X, A and B-1 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.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, which is available to investor's on Fitch's website at 'fitchratings. com'.

DUE DILIGENCE USAGE

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

The publication of a representations, warranties and enforcement mechanisms appendix is not required for this transaction.