OREANDA-NEWS. November 11, 2015. Fitch Ratings has assigned Cork Street CLO Designated Activity Company notes expected ratings, as follows:

Class A-1A: 'AAA(EXP)sf'; Outlook Stable
Class A-1B: 'AAA(EXP)sf'; Outlook Stable
Class A-2A: 'AA(EXP)sf'; Outlook Stable
Class A-2B: 'AA(EXP)sf'; Outlook Stable
Class B: 'A(EXP)sf'; Outlook Stable
Class C: 'BBB(EXP)sf'; Outlook Stable
Class D: 'BB(EXP)sf'; Outlook Stable
Subordinated notes: not rated

The assignment of final ratings is contingent on the receipt of documents conforming to information already reviewed.

Cork Street CLO Designated Activity Company is a cash flow collateralised loan obligation.

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 37 of 53 obligors in the identified portfolio. Fitch used public ratings from other NRSROs for the remaining obligors. The weighted average rating factor of the identified portfolio is 31.2, below the covenanted maximum for expected ratings of 34.5.

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 to 47 of the 63 assets in the identified portfolio. The weighted average recovery rating of the identified portfolio is 68.6%, compared with the covenanted minimum for assigning expected ratings of 67.0%.

Interest Rate Rise Hedged
Unhedged fixed-rate assets cannot exceed 10% of the portfolio while fixed-rate liabilities account for 24.3% of the target par balance. Consequently, the transaction is hedged against rising interest rates.

A-1B Margin Step-Up
The interest margin due on the floating-rate class A-1B notes is scheduled to increase two years after the issue date of the notes. The issuer may avoid the increase in the cost of funding if it exercises its option to re-price the class A-1B notes before the step-up date. Re-pricing is defined as a reduction in margin and cannot be rejected by the class A-1B noteholders. Fitch assumed in its analysis that the re-pricing option would not be exercised and the cost of funding would increase after the step-up date.

Limited FX Risk
Any non-euro-denominated assets have to be hedged with perfect asset swaps as of the settlement date, limiting foreign exchange (FX) risk. The transaction is permitted to invest up to 30% of the portfolio in non-euro-denominated assets.

TRANSACTION SUMMARY
Net proceeds from the notes will be used to purchase a EUR400m portfolio of European leveraged loans and bonds. The portfolio will be managed by Guggenheim Partners Europe 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 five 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 22 September 2015
- Preliminary offering circular provided by the arranger as at 5 November 2015