OREANDA-NEWS. Fitch Ratings has upgraded Harbourmaster CLO 8 B.V.'s class B notes, affirmed the class A2, C and D notes, and downgraded the class E notes, as follows:

EUR53.5m Class A2 (ISIN XS0277549969): affirmed at 'AAAsf'; Outlook Stable
EUR20.5m Class B (ISIN XS0277554886): upgraded to 'AAsf' from 'Asf'; Outlook Stable
EUR23.2m Class C (ISIN XS0277555933): affirmed at 'BBBsf'; Outlook Stable
EUR21.1m Class D (ISIN XS0277559174): affirmed at 'BBsf'; Outlook Negative
EUR11.6m Class E (ISIN XS0277559844): downgraded to 'B-sf' from 'Bsf'; Outlook Negative

Harbourmaster CLO 8 B.V. is a securitisation of senior secured loans primarily domiciled in Europe.

KEY RATING DRIVERS
The upgrade of the class B notes reflects the portfolio's continued amortisation since the last review in December 2014. The class A1 notes have paid in full and the class A2 notes have paid down to 63.6% of their initial outstanding balance. This has increased credit enhancement for the class A2 notes to 61.8% from 46% and for the class B notes to 47.1% from 33.1%.

Portfolio performance has remained stable. There are no defaulted assets in the portfolio and the proportion of assets rated 'CCCsf' and below has increased to 8.3% from 5.2%. The total outstanding balance of the portfolio has reduced by EUR64m. Of this, EUR8.1m has come from selling distressed assets and the remainder from prepayments.

The downgrade of the class E notes reflects that despite increasing credit enhancement they remain exposed to a long tail period with a sizable senior fixed fee amount, which would cause negative carry between the portfolio yield and the note interest. The manager would likely call the transaction early but that depends on market conditions.

Further stresses on the transaction include the increased concentration, increased cost of funding the notes due to amortisation, the unchanged risk horizon due to the maturity extension of assets keeping the weighted average life flat at 4.1 years (4.2 last year) and loose overcollateralisation test triggers. When breached these triggers divert excess spread to pay down the notes at an increased rate and increase credit enhancement. These stresses are reflected in the Negative Outlooks on the class D and E notes.

RATING SENSITIVITIES
Increasing the default rate by 1.25x to all assets in the portfolio would result in a downgrade of the class D notes by one notch. Reducing the recovery rate by 0.75x to all assets in the portfolio would result in a downgrade of the class D notes by one rating category and a downgrade of the class E notes below 'CCCsf'.

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 pool and the transaction. 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 October 2015
- Transaction reporting provided by Deutsche Bank as at 30 October 2015