OREANDA-NEWS. Fitch Ratings has affirmed Grand Harbour I B.V.'s class A-1 floating rate notes at 'AAAsf' with a Stable Outlook.

Grand Harbour I B.V. is an arbitrage cash flow collateralised loan obligation (CLO). Net proceeds from the issuance of the notes were used to purchase a EUR400m portfolio of European leveraged loans and bonds. The portfolio is managed by Blackstone/GSO Debt Funds Europe Limited, and went effective on 19 August 2013. The reinvestment period is scheduled to end in 2016.

KEY RATING DRIVERS
The affirmation reflects the transaction's stable performance since our last review. Credit enhancement for the sole rated tranche has remained constant at 40.5%, up from 40.0% at closing.

All of the assets are now rated 'B-' or better. However, there has been negative migration in the asset ratings, with 29.5% of the portfolio rated 'B-' or below compared with 21.9% at last review. There is one asset in the portfolio rated 'B-' with a Negative Outlook. According to the transaction documents, this asset is notched down to 'CCC'. However, since the transaction closed Fitch has revised its criteria in this regard and no longer notches down for a Negative Outlook.

The portfolio has reduced concentration within its largest industry with exposure to computers and electronics falling to 14.0% from 15.3% with a subsequent increase in the exposure to the healthcare sector to 13.0% from 8.6%. The number of obligors is relatively low compared with other CLO 2.0 transactions at 63 with the top ten contributing 26.2% of the portfolio. The largest and sixth largest secured senior obligors are at the maximum trigger levels of 3% and 2%, respectively.

The portfolio remains dominated by French and German assets with combined exposure having increased to 51.9% compared with 48.2% at last review. The portfolio's exposure to countries with a Country Ceiling below 'AAA' is now limited to Italian assets (6.85%) following the sale of Spanish assets and upgrade of Ireland's sovereign rating. Obligations domiciled in countries rated 'A-' or below by Fitch are capped at 10%.

The portfolio's current weighted average spread, weighted average recovery rate, weighted average rating factor and weighted average life are compliant with the covenants. The portfolio profile, coverage and quality tests are also passing.

RATING SENSITIVITIES
Fitch tested the rating's sensitivity to a 25% increase in default probability across all assets, as well and a 25% reduction in assumed recoveries. Under both scenarios, the class A-1 tranche would be affirmed at 'AAAsf'.