OREANDA-NEWS. Fitch Ratings has taken various rating actions on Harbourmaster CLO 7 B.V., as follows:

EUR44m Class A1 (ISIN XS0273833516): affirmed at 'AAAsf'; Outlook Stable
EUR149m Class A2 (ISIN XS0273887363): upgraded to 'AAAsf' from 'AAsf'; Outlook Stable
EUR41m Class A3 (ISIN XS0273889228): upgraded to 'A+sf' from 'Asf'; Outlook Stable
EUR38m Class A4 (ISIN XS0273890664): affirmed at 'BBBsf'; Outlook revised to Stable from Negative
EUR38m Class B1 (ISIN XS0273891639): affirmed at 'BBsf'; Outlook Negative
EUR16.2m Class B2 (ISIN XS0273894732): downgraded to 'B-sf' from 'Bsf'; Outlook Negative
EUR3m Class S2 combo (XS0273896273): upgraded to 'A+sf' from 'Asf'; Outlook Stable
EUR4.8m Class S4 combo (XS0273897917): affirmed at 'BBBsf' and withdrawn
EUR1.9m Class S5 combo (XS0273900992): affirmed at 'BBBsf'; Outlook revised to Stable from Negative

Harbourmaster CLO 7 B.V. is a securitisation of mainly European senior secured loans, senior unsecured loans, second-lien loans, mezzanine obligations and high-yield bonds. At closing a total note issuance of EUR925m was used to invest in a target portfolio of EUR900m. The portfolio is actively managed by GSO / Blackstone Debt Funds Management Europe Limited.

KEY RATING DRIVERS
The upgrade of the class A2 and A3 notes, the affirmation of the class A1 notes and the Outlook revision on the class A4 notes, reflect the notes' increased credit enhancement as a result of substantial amortisation of the class A1 notes. Over the last 12 months, the class A1's outstanding note balance decreased by just over EUR100m, increasing the notes' credit enhancement to 87% from 54%. Credit enhancement on the class A2 and class A3 notes increased to 45% from 28% and to 33% from 21%, respectively.

The downgrade of the class B2 notes reflects our view that the increase in credit enhancement is insufficient to protect the notes from increased vulnerability to portfolio credit quality deterioration or to further defaults. Over the last 12 months, one additional obligor defaulted with an outstanding balance of around EUR4.5m, adding to the remaining outstanding default of EUR1.3m. Overall, recoveries on the defaulted assets are being haircut to around 5% of their par value. Considering the high portfolio concentration additional defaults could lead to losses on the class B2 notes. The top 10 obligors currently represent 53% of the portfolio, compared with 38% a year ago. The largest obligor now makes up for 6.4%, compared with 4.7% previously.

The ratings of the combination notes S2 and S5 are linked to the ratings of their respective components, the class A3 and A4 notes. The rating of the class S4 notes was withdrawn, as the notes were decoupled in November 2014.

Overall, the portfolio's credit quality has remained stable. The 'CCC' and below bucket decreased to 3.71% from 4.54% over the past 12 months and the weighted average rating factor increased to 30.1 from 28.7, remaining within the 'B'/'B-' category. The weighted average life of the portfolio increased marginally to 4.1 years from 3.96 years, indicating maturity extensions of underlying assets.

The largest country included in the portfolio is the UK with 21%, up from 15%, followed by the U.S. and France each at 19%, compared with 13% and 21%, respectively. There have been some significant changes in industry distribution. As such, healthcare is the largest industry with 19%, up from 12% and cable is now only 2%, down from 9%.

RATING SENSITIVITIES
Fitch rating sensitivity analysis showed that stressing the probability of default and recoveries each by 25% would result in negative rating migration on all notes, except for the class A1 and A3 notes.