OREANDA-NEWS. Fitch Ratings has affirmed Jubilee 2013-X B.V's class A floating rate note at 'AAAsf' with a Stable Outlook.

Jubilee CLO 2013-X B.V. is a cash flow collateralised loan obligation (CLO). Net proceeds from the issue of the notes were used to purchase a EUR391m portfolio of European leveraged loans and bonds. The portfolio is managed by Alcentra Ltd. and went effective on 5 November 2013. The reinvestment period is scheduled to end in 2017.

KEY RATING DRIVERS

The affirmation reflects the transaction's stable performance. Credit enhancement of the class A note has marginally improved over the last 12 months, increasing by 0.2% and there have been no defaults. The portfolio has built EUR0.78m of par and is currently EUR3m above target par. Cash has increased to EUR50.7m from EUR19.3m and currently accounts for 13% of total assets, compared with 5% a year ago. The cash balance is currently above normal levels due to significant repayments of loans and bonds in March.

The portfolio's current weighted average spread, weighted average rating factor and weighted average life are compliant with the covenants. The portfolio is, however, currently failing the weighted average recovery rate test with a current rate of 67%, 1% below the covenant. The portfolio has been breaching this test since the January 2015 trustee report; however; it is passing the weighted average rating factor test with a significant margin and so would satisfy a different combination of covenant thresholds.

As per the April trustee report cable has become the largest Fitch industry concentration, accounting for 11.1% of the portfolio, compared with 5.2% a year ago. Assets from Germany, the UK and the Netherlands account for 49% of the portfolio, compared with 50% during the same period. Peripheral exposure (defined as exposure to countries with a country ceiling below AAA) accounts for 4.69% of the portfolio and resides within Italy and Spain, down from 8%. This is attributed to a reduction in exposure to both Italy and Spain and the upgrade of Ireland's sovereign rating. The transaction has a restriction on this concentration at 10%.

RATING SENSITIVITIES

A 25% increase in the expected obligor default probability would lead to a downgrade of up to two notches for the rated note. A 25% reduction in the expected recovery rates would lead to a downgrade of one notch for the rated note.