OREANDA-NEWS. Fitch Ratings assigns the following ratings to LCM XVIII Limited Partnership/LLC:

--\$349,750,000 class A-1 notes 'AAAsf'; Outlook Stable;
--\$20,000,000 class A-2 notes 'AAAsf'; Outlook Stable.

Fitch does not rate the class B-1, B-2, C-1, C-2, D, E notes or the LP certificates.

TRANSACTION SUMMARY

LCM XVIII Limited Partnership (the issuer) and LCM XVIII LLC (the co-issuer), together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by LCM Asset Management LLC (LCM). Net proceeds from the issuance of the secured notes and limited partnership (LP) certificates will be used to purchase a portfolio of approximately \$600 million of primarily senior secured leveraged loans. The CLO will have approximately a four-year reinvestment period and two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 38.4% for class A-1 and A-2 notes (collectively, class A notes), in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAAsf' stress scenario. The degree of CE available to class A notes is above the average CE of recent CLO issuances.

'B' Asset Quality: The average credit quality of the indicative portfolio is 'B', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch Ratings' opinion, class A notes are unlikely to be affected by the foreseeable level of defaults. Class A notes are projected to be able to withstand default rates of up to 61.9%.

Strong Recovery Expectations: The indicative portfolio consists of 93.7% first-lien loans. Approximately 87.8% 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 75.0%. In determining the class A note rating, 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 stress scenarios resulting in a 35.3% recovery rate 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 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 notes.