OREANDA-NEWS. Fitch Ratings has affirmed Harvest CLO V plc's notes as follows:

Class A-R (No ISIN): affirmed at 'AAAsf'; Outlook Stable
Class A-D (ISIN XS0293379342): affirmed at 'AAAsf'; Outlook Stable
Class A-2 (ISIN XS0293379771): affirmed at 'AAsf'; Outlook Stable
Class B (ISIN XS0293380191): affirmed at 'Asf'; Outlook Stable
Class C-1 (ISIN XS0293380274): affirmed at 'BBBsf'; Outlook Stable
Class C-2 (ISIN XS0293951280): affirmed at 'BBBsf'; Outlook Stable
Class D (ISIN XS0293380431): affirmed at 'BBsf'; Outlook Stable
Class E-1 (ISIN XS0293380514): affirmed at 'Bsf'; Outlook Stable
Class E-2 (ISIN XS0293952684): affirmed at 'Bsf'; Outlook Stable
Class Q (ISIN XS0293380944): affirmed at 'BB-sf'; Outlook Stable

Harvest CLO V is a securitisation of mainly senior secured, senior unsecured, second-lien and mezzanine loans (including revolvers). At closing a total note issuance of EUR650m was used to invest in a target portfolio of EUR632m. The portfolio is actively managed by 3i Debt Management Investments Limited.

KEY RATING DRIVERS
The affirmation reflects adequate levels of credit enhancement for the rated notes. The credit quality of performing assets has improved since November 2013, as reflected in the reported weighted average rating factor decreasing to 27.8 currently from 28.7 in November 2013,. However, four assets have defaulted in the last 12 months.

Following the end of the reinvestment period in May 2014, the manager can reinvest unscheduled principal proceeds and proceeds from the sale of credit-improved and credit- impaired assets, subject to certain conditions. The manager is currently unable to reinvest any principal proceeds because of a breach of the portfolio profile tests as well as the class E over-collateralisation (OC) test level being below 108%.

Although Fitch considers a return to reinvesting unlikely, the agency expects limited deleveraging of the structure in the near future given the significantly back-loaded maturity profile of the portfolio. Only 1% of the portfolio is scheduled to mature between now and 2016, while 25.4% and 29.1% of the portfolio is scheduled to mature in 2020 and 2021, respectively.

The transaction is currently passing all OC tests. The OC test values have deteriorated since November 2013 due to defaults in the portfolio, leading to a breach of the class E OC test. The class A-R and A-D notes were partially redeemed in November 2014, curing the class E OC test failure. However, while the class A/B OC test result is now above its November 2013 level, the remaining OC tests remain below their values 12 months ago but are still in compliance. All interest coverage tests are passing with significant buffers.

The transaction uses the multi-currency class A-R variable funding notes to hedge GBP and USD exposure. The main hedging strategy following the end of the reinvestment period involves matching senior note redemptions by currency so that GBP and USD principal proceeds are used to redeem GBP and USD-denominated class A-R drawings while euro principal proceeds are used to redeem euro-denominated senior liabilities, thus keeping the balance of GBP and USD-denominated assets and liabilities aligned. However, a skew of defaults or prepayment activity to assets denominated in a single currency can create a currency mismatch, introducing additional performance volatility for the transaction. Fitch has considered the impact of a currency mismatch in its analysis.