OREANDA-NEWS. November 10, 2015. Fitch Ratings has upgraded the Class A-1B, A-2, B-1 and B-2 notes of Harvest CLO IV Plc and affirmed the others as follows:

EUR93,286,165 Class A-1A: Affirmed at 'AAAsf' ; Outlook Stable
EUR74,000,000 Class A-1B: Upgraded to 'AAAsf' from 'AAsf' ; Outlook Stable
EUR15,781,714 Class A-2: Upgraded to 'AAAsf' from 'AAsf' ; Outlook Stable
EUR54,600,000 Class B-1: Upgraded to 'AAsf' from 'Asf' ; Outlook Stable
EUR4,400,000 Class B-2: Upgraded to 'AAsf' from 'Asf' ; Outlook Stable
EUR29,000,000 Class C: Affirmed at 'BBBsf' ; Outlook Stable
EUR11,100,000 Class D-1: Affirmed at 'BBsf' ; Outlook Stable
EUR8,900,000 Class D-2: Affirmed at 'BBsf' ; Outlook Stable
EUR15,400,000 Class E-1: Affirmed at 'Bsf' ; Outlook revised to Stable from Negative
EUR1,600,000 Class E-2: Affirmed at 'Bsf' ; Outlook revised to Stable from Negative
EUR47,000,000 Class F: not rated

Harvest CLO IV Plc. is a securitisation of senior secured loans managed by 3i Debt Management Investments Ltd, which closed in 2006. The final legal maturity is July 2021.

KEY RATING DRIVERS
The upgrades reflect the stable performance of the portfolio and the deleveraging that has occurred since the transaction exited its reinvestment period in July 2013. Since last reviewed in December 2014, EUR167m has been repaid on the Class A-1A and A-2 notes, which has increased the credit enhancement available to all notes. In this same period there has been only one new default in the portfolio representing 1.8% of the current performing portfolio.

As a result of the deleveraging and stable portfolio performance, the credit enhancement available to the Class A-1A, A-1B, A-2, B, C, D and E notes has grown to 70.6% (from 51.6%), 44.6% (32.7%), 44.6% (32.7%), 25.6% (18.9%), 16.2% (12.2%), 9.8% (7.5%) and 4.3% (3.5%), respectively, since last reviewed.

The revision of the Outlooks on the Class E notes is a result of the growth in credit enhancement since last reviewed, a reduction in the long-dated asset bucket from 0.66% to 0.46% and a reduction in the amend and extend activity.

Due to deleveraging, the underlying portfolio has become more concentrated and now contains 60 obligors compared to 83 at last review. The top 10 obligors in the portfolio have risen to 33.2% from 21.5% in the same period. While this concentration is in line with expectations, it will limit the potential upgrades of the junior notes due to increased concentration risk.

The Fitch Weighted Average Rating Factor (WARF) calculated by Fitch rose to 33.85 from 33.00 when last reviewed, mainly on the portfolio amortisation as higher quality assets made up a larger portion of the assets which repaid. Despite this, the transaction remains within its WARF covenant, as calculated by the Trustee, with a 1.2% cushion.

The Fitch Weighted Average Recovery Rate (WARR) remained largely unchanged at 66.6% form 66.3% at last review, also as a result of portfolio amortisation. The WARR is below the covenanted level of 69%.

All OC tests are currently compliant, however the manager is unable to reinvest any proceeds due to failure of five portfolio profile tests, one collateral quality test and the reinvestment test. In Fitch's view it is unlikely that the transaction will become compliant in all of these tests and it is therefore viewed as unlikely that the manager will have the ability to reinvest any proceeds for the remainder of the transaction's life.

RATING SENSITIVITIES

Increasing the default probability of all the assets in the portfolio by 25%, or applying a recovery rate haircut of 25% on all the assets would likely result in a downgrade of the notes of between zero and two notches

DUE DILIGENCE USAGE

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

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

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 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 Deutsche Bank as at 30 September 2015