OREANDA-NEWS. Fitch Ratings has assigned the following ratings to Octagon Investment Partners XXIII, Ltd./LLC:

--$193,800,000 class A-1 notes 'AAAsf'; Outlook Stable;
--$193,800,000 class A-2 notes 'AAAsf'; Outlook Stable.

Fitch does not rate the class B, C, D, E-1, E-2, F, subordinated or delayed draw notes.

TRANSACTION SUMMARY
Octagon Investment Partners XXIII, Ltd. (the issuer) and Octagon Investment Partners XXIII, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Octagon Credit Investors, LLC (Octagon). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $600 million primarily senior secured leveraged loans. The CLO will have a four-year reinvestment period and a 1.3-year non-call period.

KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 35.4% for class A-1 and A-2 (together, 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 below the average CE of recent CLO issuances, but cash flow analysis shows that the projected performance of class A notes is in line with other Fitch-rated CLOs.

'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B,' which is in line with recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch's 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 58.9%.

Strong Recovery Expectations: The indicative portfolio consists of 94.7% senior secured loans. Approximately 88.7% 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 76.1%. In determining ratings for class A 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 36.0% 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 and A-2 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'A+sf' and 'AAAsf' for these notes.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available shortly to investors on Fitch's website at 'www.fitchratings.com'.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

The publication of a RW&Es appendix is not required for this transaction.