OREANDA-NEWS. Fitch Ratings has assigned Adagio IV CLO Limited's notes final ratings as follows:

EUR200.5m class A-1: 'AAAsf'; Outlook Stable
EUR5m class A-2: 'AAAsf'; Outlook Stable
EUR39.2m class B-1: 'AAsf'; Outlook Stable
EUR7m class B-2: 'AAsf; Outlook Stable
EUR18m class C: 'Asf'; Outlook Stable
EUR18.6m class D: 'BBBsf'; Outlook Stable
EUR25.2m class E: 'BBsf'; Outlook Stable
EUR11.7m class F: 'B-sf'; Outlook Stable
EUR37.1m subordinated notes: not rated

Adagio IV CLO Limited is an arbitrage 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'/'B-' range. Fitch has public ratings or credit opinions on 85 of the 86 assets in the identified portfolio. The Fitch weighted average rating factor (WARF) of the identified portfolio is 32.4, below the covenanted maximum for assigning the final ratings of 33.5.

High Recovery Expectations
At least 90% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. Fitch has assigned Recovery Ratings (RRs) to 85 of the 86 assets in the identified portfolio. The Fitch weighted average recovery rate (WARR) of the identified portfolio is 74.1%, above the covenanted minimum for assigning the final ratings of 68%.

Partial Interest Rate Hedge
Between 0% and 7.5% of the portfolio can be invested in fixed-rate assets, while fixed-rate liabilities account for 3.4% of the target par amount. Therefore, the transaction is partially hedged against rising interest rates.

Payment Frequency Switch
The notes pay quarterly, while the portfolio assets can reset to semi-annual. The transaction has an interest-smoothing account, but no liquidity facility. A liquidity stress for the non-deferrable classes A and B, stemming from a large proportion of assets resetting to semi-annual in any one quarter, is addressed by switching the payment frequency on the notes to semi-annual, subject to certain conditions.

Hedged Non-Euro Assets Exposure
The transaction is permitted to invest up to 30% of the portfolio in non-euro assets, provided perfect asset swaps can be entered into.

TRANSACTION SUMMARY
Net proceeds from the notes issue are being used to purchase a EUR350m portfolio of mostly European leveraged loans and bonds. The portfolio is managed by Axa Investment Managers, Inc. 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.

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 Recognised Statistical Rating Organisations 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 arranger as at 20 July 2015
- Offering circular provided by the arranger as at 8 September 2015

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report. In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website."

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