OREANDA-NEWS. Fitch Ratings has assigned Harvest CLO XII Limited notes final ratings, as follows:

Class A-1: 'AAAsf'; Outlook Stable
Class A-2: 'AAAsf'; Outlook Stable
Class B-1: 'AA+sf'; Outlook Stable
Class B-2: 'AA+sf'; Outlook Stable
Class C: 'A+sf'; Outlook Stable
Class D: 'BBBsf'; Outlook Stable
Class E: 'BB+sf'; Outlook Stable
Class F: 'B-sf'; Outlook Stable
Subordinated notes: not rated

Harvest CLO XII Limited is a cash flow collateralised loan obligation (CLO).

KEY RATING DRIVERS
'B'/'B-' Portfolio Credit Quality
Fitch expects the average credit quality of obligors to be in the 'B' category. Fitch has credit opinions or public ratings on the entire identified portfolio. The Fitch-weighted average rating factor of the initial portfolio is 32.0.

High Recovery Expectations
At least 90% of the portfolio will comprise senior secured obligations. Recovery prospects for these assets are typically more favourable than for second-lien, unsecured and mezzanine assets. Fitch has assigned Recovery Ratings (RRs) to all of the assets in the identified portfolio. The Fitch-weighted average RR of the initial portfolio is 71.5%.

Tighter Concentration Covenants
Senior secured loan obligor exposure is limited to 2.5% of the aggregate collateral balance, while unsecured senior and second-lien/mezzanine exposure is subject to a 1.5% limit (both without exceptions). The maximum Fitch industry exposure is restricted to 15% for the largest industry, and 35% for the top three. These covenants compare favourably with other transactions.

Limited Interest Rate Risk
Unhedged fixed-rate assets cannot exceed 5% of the portfolio while fixed-rate liabilities represent 4.5% of target par. Consequently, interest rate risk is naturally hedged for most of the portfolio through floating-rate liabilities.

TRANSACTION SUMMARY
Net proceeds from the notes were used to purchase a EUR400m portfolio of European leveraged loans and bonds. The portfolio is managed by 3i Debt Management Investments Limited. 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 three 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.

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.
- Loan-by-loan data provided by the portfolio manager as at 2 April 2015
- Offering circular provided by the arranger as at 4 August 2015
- Transaction documents provided by the arranger as at 6 August 2015.