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

Class A: 'AAAsf'; Outlook Stable

Class B: 'AAsf'; Outlook Stable

Class C: 'Asf'; Outlook Stable

Class D: 'BBBsf'; Outlook Stable

Class E: 'BBsf'; Outlook Stable

Class F: 'B-sf'; Outlook Stable

Class M-1: not rated

Class M-2: not rated

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

KEY RATING DRIVERS

'B'/'B-' Portfolio Credit Quality

The average credit quality of the identified portfolio is 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.

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%.

Diversified Asset Portfolio

The transaction documents provide the investment manager with the flexibility to choose different obligor concentration limits within the portfolio. This covenant ensures that the asset portfolio will not be exposed to excessive obligor concentration. The investment manager will then have the flexibility to trade obligor concentration in the portfolio against credit quality and excess spread.

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 are being used to purchase a EUR350m portfolio of mostly European leveraged loans and bonds. The portfolio is 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 17 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 would lead to a downgrade of up to two notches for the rated notes while a 25% reduction in expected recovery rates would lead to a downgrade of up to three notches for the rated notes.

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 Recognized Statistical Rating Organizations 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.

SOURCES OF INFORMATION

The information below was used in the analysis.

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

- Transaction documents provided by the arranger as of 21 July 2016

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.