OREANDA-NEWS. Fitch Ratings has assigned Arbour CLO II Limited notes final ratings, as follows:

EUR5m class A1: 'AAAsf'; Outlook Stable
EUR204.3m class A2: 'AAAsf'; Outlook Stable
EUR22m class B1: 'AAsf'; Outlook Stable
EUR25.7m class B2: 'AAsf'; Outlook Stable
EUR10m class C1: 'Asf'; Outlook Stable
EUR12m class C2: 'Asf'; Outlook Stable
EUR19.8m class D: 'BBBsf'; Outlook Stable
EUR26.2m class E: 'BBsf'; Outlook Stable
EUR10.6m class F: 'B-sf'; Outlook Stable
EUR39.5m subordinated notes: not rated

Arbour CLO II Limited is an arbitrage cash flow collateralised loan obligation (CLO). Net proceeds from the issuance of the notes are being used to purchase a EUR365.3m portfolio of mostly European leveraged loans and bonds. The portfolio is managed by Oaktree Capital Management (UK) LLP. The transaction features a four-year reinvestment period.

KEY RATING DRIVERS

'B'/'B-' Portfolio Credit Quality
Fitch expects the average credit quality of obligors to be in the 'B'/'B-' range. Fitch has credit opinions or public ratings on all the obligors in the identified portfolio. The covenanted maximum Fitch weighted average rating factor (WARF) for assigning the final ratings is 34. The WARF of the identified portfolio is 31.4.

High Recovery Expectations
At least 90% of the portfolio will comprise senior secured loans and bonds. Recovery prospects for these assets are typically more favourable than for second-lien, unsecured, and mezzanine assets. Fitch has assigned Recovery Ratings (RR) to all the assets in the identified portfolio. The covenanted minimum Fitch weighted average recovery rate (WARR) for assigning the final ratings is 69.5%. The WARR of the identified portfolio is 73.4%.

Above-Average Concentration
Portfolio profile tests limit the exposure to the largest Fitch industry to 20% and to the three largest Fitch industries to 50%. This is above the threshold for CLOs rated recently by Fitch. Furthermore, up to five obligors in the portfolio can each represent 3% of the pool. This is above the typical number of exceptions for CLOs rated recently by Fitch.

Partial Interest Rate Hedge
Between 5% and 15% of the portfolio may be invested in fixed-rate assets, while fixed-rate liabilities account for 10.1% of the target par amount. If the minimum fixed-rate assets test falls below 5%, the collateral manager will not be able to buy floating-rate assets until the test is satisfied.

Limited FX Risk
The transaction is allowed to invest up to 30% of the portfolio in non-euro-denominated assets, provided these are hedged with perfect asset swaps within six months of purchase. Unhedged non-euro assets may not exceed 2.5% of the portfolio at any time.

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 confirmation to be given if Fitch declines to comment.