OREANDA-NEWS. Fitch Ratings has downgraded Harbourmaster CLO 4 B.V.'s class B2E and B2F notes, and affirmed the others, as follows:

Class B1 (ISIN XS0203061907): affirmed at 'CCCsf'; Recovery Estimate (RE) 95%
Class B2E (ISIN XS0203062467): downgraded to 'Csf' from 'CCsf'; RE 0%
Class B2F (ISIN XS0203063945): downgraded to 'Csf' from 'CCsf'; RE 0%
Class S2 (ISIN XS0203066534): affirmed at 'CCCsf'; RE 95%

Harbourmaster CLO 4 B.V. is a securitisation of a portfolio of mainly European senior secured and unsecured loans. The portfolio is managed by Blackstone/GSO Debt Funds Management Europe Limited.

Key Rating Drivers
Since the last rating action on 8 January 2015 the rated notes have been paid down by EUR70m with the class A2E, class A2F, class A3 and class A4 notes paid in full. In addition the class B1 notes have received EUR6.37m of principal proceeds and are currently 42% outstanding.

The transaction has sold 29 assets during the period with four assets sold slightly above par and 25 assets below. There are only three assets remaining in the portfolio, which all previously defaulted, have recently been restructured and are from the same issuer. Two of the assets, which make up 95% of the portfolio, are 'paid-in-kind' loans that mature after the legal final maturity of the transaction.

The transaction is holding cash of EUR4.7m, which is currently greater than the EUR4.6m liability balance of the class B1 notes. However, due to substantial senior expenses and the mismatch of assets and liabilities the transaction suffers from negative excess spread. The cash balance is therefore not expected to be sufficient to pay down the class B1 note in full on the next payment date and so the transaction will rely on principal proceeds from the portfolio. If no sufficient sales proceeds are received before the next payment date the class B1 notes will remain partially outstanding and will thereafter rely on principal proceeds to pay timely interest. As a result default of the class B1 notes remains a real possibility.

The junior notes, B2E and B2F, are under-collateralised and deferring interest. The coupons on the class B2E and B2F notes are considerably higher than the current senior note and as a result the timely interest liability would increase substantially for the transaction if the B1 notes are to be paid in full. This would result in an event of default. If the B1 notes remain outstanding beyond the next payment date the negative excess spread will continue to divert principal proceeds and the junior notes will receive no future benefit from cashflows. As a result the notes have been downgraded to 'Csf' from 'CCsf' and the recovery estimate of 0% has been maintained.

RATING SENSITIVITIES
The notes are already at distressed rating levels and as such are unlikely to be affected by any further deterioration in the respective underlying asset portfolios.

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 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 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 of 30 October 2015
- Transaction reporting provided by Deutsche Bank as of 30 October 2015