OREANDA-NEWS. S&P Global Ratings today lowered its rating on the class F notes and removed it from CreditWatch with negative implications from Trinitas CLO II Ltd., a U. S. collateralized loan obligation (CLO) managed by Triumph Capital Advisors LLC. We also affirmed our ratings on the class X, A-1, A-2, B-1, B-2, C, D, E, and combination notes from the same transaction (see list).

Today's rating actions follow our review of the transaction's performance using data from the July 5, 2016, trustee report.

The lowered rating reflects deteriorated credit quality of the underlying portfolio and the decrease in credit support available to the class F notes. The amount of 'CCC' assets held in the portfolio has increased to $35.37 million as of the July 2016 trustee report from $8.93 million as of the October 2014 trustee report that we used in our effective date analysis. The trustee also reported an increase in defaulted assets to $8.41 million from zero over the same time period.

The deteriorated credit quality among the underlying portfolio combined with some par loss has led to the following declines in the trustee-reported overcollateralization (O/C) ratios compared with October 2014:The class A/B O/C ratio declined to 124.50% from 128.24%,The class C O/C ratio declined to 116.31% from 119.80%,The class D O/C ratio declined to 109.67% from 112.96%, andThe class E O/C ratio declined to 104.51% from 107.65%.The interest diversion test, which measures the O/C level at class F, has also declined since the effective date to 102.92% from 106.01%. In the event that this test is not satisfied during the reinvestment period, the lesser of 50% of remaining interest proceeds or the amount necessary to bring the test back into compliance at the discretion of the manager will be deposited into the principal proceeds collection account or to pay down the senior notes according to the principal payment sequence.

We note that the transaction has been structured such that the class F notes do not have an O/C test and that this interest diversion test will no longer be calculated after the transaction exits its reinvestment period.

The cash flow results, on a standalone basis, showed the class F notes were not passing at a 'B' rating level. At this time, the lowered rating is limited to one notch as we do not feel that this class represents our definition of 'CCC' risk. However, any increase in defaults or par losses could lead to potential negative rating actions in the future.

Also, we note the cash flow results indicated higher ratings for the class B-1, B-2, C, D, E, and combination notes. But we took into account that the transaction is still in its reinvestment period, which is not scheduled to end until July 2018, and that it has not yet paid down any principal to the rated notes. Future reinvestment activity could change some of the portfolio characteristics.

The affirmed ratings reflect adequate credit support at the current rating levels, though any further deterioration in the credit support available to the notes could results in further ratings changes.

Our review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the aforementioned trustee report, to estimate future performance. In line with our criteria, our cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults and recoveries upon default under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in our view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with this rating action.

S&P Global Ratings will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary.