Fitch to Rate ECP CLO 2015-7, Ltd./LLC; Issues Presale
--\$321,100,000 class A-1 notes 'AAAsf'; Outlook Stable.
Fitch does not expect to rate the class A-1-F, A-2, A-2-F, B-1, B-1-F, B-2, B-2-F, C, C-F, D, D-F, E, E-F or subordinated notes.
TRANSACTION SUMMARY
ECP CLO 2015-7, Ltd. (the issuer) and ECP CLO 2015-7 LLC (the co-issuer) represent an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Silvermine Capital Management (Silvermine). A portion of net proceeds from the issuance of notes will be used to repay parties that provided interim financing, allowing the issuer to purchase collateral prior to the closing date. The remainder of net proceeds will be used to purchase assets to reach a target portfolio of \$500 million of leveraged loans. The CLO will have a four-year reinvestment period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 35.8% for class A-1, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE for class A-1 notes is below the average for recent CLO issuances.
'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is slightly better than that of recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch's opinion, class A-1 notes are unlikely to be affected by the foreseeable level of defaults. The class A-1 notes are robust against default rates of up to 58.8%.
Strong Recovery Expectations: The indicative portfolio consists of 94.8% senior-secured loans. Approximately 90.9% of the indicative portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher and the base case recovery assumption is 73.6%. In determining ratings for class A-1 notes, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stresses resulting in a 35.4% recovery rate assumption in Fitch's 'AAAsf' scenario.
RATING SENSITIVITIES
Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. Fitch expects the class A-1 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'A+sf' and 'AAAsf' for the class A-1 notes.
The expected ratings are based on information provided to Fitch as of March 18, 2015. Sources of information used to assess these ratings were provided by the arranger, Citigroup Global Markets Inc., and the public domain. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.
The presale report is available to investors on Fitch's web site at www.fitchratings.com. For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'webmaster@fitchratings.com'.
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