OREANDA-NEWS. Fitch Ratings has assigned Cairn CLO V B.V. final ratings, as follows:

Class A: 'AAAsf'; Outlook Stable
Class B-1: 'AAsf'; Outlook Stable
Class B-2: 'AAsf'; Outlook Stable
Class C: 'Asf'; Outlook Stable
Class D: 'BBBsf'; Outlook Stable
Class E: 'BBsf'; Outlook Stable
Class F: 'Bsf'; Outlook Stable
Subordinated notes: not rated

Cairn CLO V B.V. is an arbitrage cash flow collateralised loan obligation (CLO).

KEY RATING DRIVERS
'B'/'B-' Portfolio Credit Quality
Fitch places the average credit quality of obligors in the 'B'/'B-' range. The agency has public ratings or credit opinions on 65 of the 67 assets in the identified portfolio. The Fitch weighted average rating factor (WARF) of the identified portfolio is 32.6, below the covenanted maximum for assigning the final ratings of 34.5.

High Recovery Expectations
The portfolio will comprise a minimum 90% of senior secured obligations. Fitch has assigned Recovery Ratings to 65 of the 67 assets in the identified portfolio. The weighted average recovery rate (WARR) of the identified portfolio is 68.6%, above the covenanted minimum for assigning the final ratings of 68%.

Partial Interest Rate Hedge
Between 0% and 5% of the portfolio can be invested in fixed-rate assets, while fixed-rate liabilities account for 2.3% of the target par amount. At closing the issuer entered into interest rate caps to hedge the transaction against rising interest rate. The notional of the caps is EUR10m, representing 3.3% of the target par amount, and the strike rate is fixed at 4%. The caps will expire five years after the closing date.

Diversified Asset Portfolio
The transaction documents provide the investment manager with the flexibility to choose different obligor concentration covenants within the portfolio. The covenanted maximum exposure to the top 10 obligor for assigning the final ratings is 20% of the portfolio balance. This covenant ensures that the asset portfolio will not be exposed to excessive obligor concentration. The manager will then have the flexibility to trade obligor concentration in the portfolio against credit quality (WARF and WARR covenants) and excess spread (weighted average spread and weighted average coupon covenants).

TRANSACTION SUMMARY
Net proceeds from the notes issue were used to purchase a EUR300m portfolio of mostly European leveraged loans and bonds. The portfolio is managed by Cairn Loan Investments LLP. The reinvestment period is scheduled to end in 2019.

The transaction documents may be amended subject to rating agency confirmation or noteholder approval. Where rating agency confirmation relates to risk factors, Fitch will analyse the proposed change and may provide a rating action commentary if the change has a negative impact on the ratings. Such amendments may delay the repayment of the notes as long as Fitch's analysis confirms the expected repayment of principal at the legal final maturity.

If in the agency's opinion the amendment is risk-neutral from a rating perspective Fitch may decline to comment. Noteholders should be aware that confirmation is considered to be given if Fitch declines to comment.

RATING SENSITIVITIES
A 25% increase in the obligor default probability would lead to a downgrade of up to two notches for the rated notes. A 25% reduction in expected recovery rates would lead to a downgrade of up to four notches for the rated notes.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will shortly be available at www.fitchratings.com.

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

DATA ADEQUACY
The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.

Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis:
- Indicative asset-by-asset data provided by the investment manager as at 24 April2015.