Fitch Assigns Jubilee CLO 2016-XVII B. V. Final Ratings
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
Subordinated notes: not rated
Jubilee 2016-XVII is a cash flow collateralised loan obligation (CLO). Net proceeds from the notes issue are being used to purchase a EUR400m portfolio of mostly European leveraged loans and bonds. The portfolio is managed by Alcentra Ltd. The reinvestment period is scheduled to end in 2020.
KEY RATING DRIVERS
'B'/'B-' Portfolio Credit Quality
Fitch places the average credit quality of obligors in the 'B'/'B-' range. The agency has public ratings or credit opinions on all of the obligors in the identified portfolio. The Fitch weighted average rating factor of the identified portfolio is 32.6.
High Expected Recoveries
The portfolio will comprise of a minimum 90% senior secured obligations. The Fitch weighted average recovery rate of the identified portfolio is 67%.
Diversified Asset Portfolio
The covenanted maximum exposure to the top 10 obligors for assigning the final ratings is 20% of the portfolio balance. This covenant ensures that the asset portfolio will not be exposed to excessive obligor concentration.
Limited Interest Rate Risk Exposure
Between 0% and 5% of the portfolio can be invested in fixed-rate assets, while the liabilities pay a floating-rate coupon. Fitch modelled both 0% and 5% fixed-rate buckets and found the rated notes can withstand the interest rate mismatch associated with each scenario.
Hedged Non-Euro Asset Exposure
The transaction is permitted to invest up to 30% of the portfolio in non-euro assets, provided perfect asset swaps can be entered into.
Documentation Amendments
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 the structure considers the confirmation to be given if Fitch declines to comment.
RATING SENSITIVITIES
A 25% increase in the obligor default probability would lead to a downgrade of up to two notches for the rated notes. A 25% reduction in expected recovery rates would lead to a downgrade of up to three notches for the rated notes.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch 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 Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information.
SOURCES OF INFORMATION
The information below was used in the analysis:
-Loan-by-loan data provided by the arranger as at 29 June 2016
-Prospectus provided by the arranger as at 7 September 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 transactions do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. Therefore, Fitch credit reports for EMEA leveraged finance CLOs transactions will not typically include descriptions of RW&Es. For further information, see Fitch's Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated 21 January 2016.
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