S&P: Flagship CLO VI Ratings Raised On Three Classes, Affirmed On Four
Today's rating actions follow our review of the transaction's performance using data from the trustee report dated July 8, 2016.
The upgrades mainly reflect a $169.50 million paydown to the class A-1A notes and a $4.77 million paydown to the class A-2 notes since our February 2015 rating actions. Following the June 2, 2016 payment date, the class A-1A and A-2 notes have been paid down to 36.23% and 42.60% of their original outstanding balances, respectively.
These paydowns resulted in improved reported overcollateralization (O/C) ratios since our February 2015 rating actions, which referenced the January 2015 trustee report:The class A/B O/C ratio improved to 152.23% from 125.80%,The class C O/C ratio improved to 131.59% from 117.48%,The class D O/C ratio improved to 117.44% from 110.96%, andThe class E O/C ratio improved to 106.45% from 105.35%.The transaction has also benefited from a drop in the weighted average life due to the underlying collateral's seasoning, with 2.66 years reported as of the July 2016 trustee report, compared with 3.50 years reported at the time of our February 2015 rating actions.
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 these rating actions.
We will continue to review whether, in our view, the ratings on the notes remain consistent with the credit enhancement available to support them, and will take rating actions as we deem necessary.
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