OREANDA-NEWS. December 15, 2015. Fitch Ratings has upgraded Avoca CLO VI plc's class B notes, as follows:

EUR41.7m Class A1 (ISIN XS0272579763): affirmed at 'AAAsf'; Outlook Stable
EUR64m Class A2 (ISIN XS0272580266): affirmed at 'AAAsf'; Outlook Stable
EUR19.4m Class B (ISIN XS0272580779): upgraded to 'AAAsf' from 'AAsf'; Outlook Stable
EUR31.5m Class C (ISIN XS0272580936): affirmed at 'Asf'; Outlook revised to Positive from Stable
EUR20m Class D (ISIN XS0272582395): affirmed at 'BBBsf'; Outlook revised to Positive from Stable
EUR23.9m Class E (ISIN XS0272583286): affirmed at 'BBsf'; Outlook Stable
EUR10m Class F (ISIN XS0272583955): affirmed at 'Bsf'; Outlook Stable
EUR7m Class V (ISIN XS0272586891): affirmed at 'BBBsf'; Outlook revised to Positive from Stable

Avoca CLO VI plc is a managed cash arbitrage securitisation of secured leveraged loans, primarily domiciled in Europe. The transaction closed in 2006 and is actively managed by KKR Credit Advisors.

KEY RATING DRIVERS
The upgrade of the class B notes reflects the significant deleveraging and stable asset performance. The class A1 notes have been paid down by EUR118m and credit enhancement (CE) has increased for all rated notes For the class B notes it has increased by 14.9% and for the class F notes by 1.5%. Fitch has revised the Outlook on the class C, D and V notes to Positive as we expect deleveraging to continue over the next year.

The asset performance has been stable. All collateral quality tests are passing except the weighted average maturity test, which has been pushed back to 01 August 2010 from 01 March 2019. The change is partially due to 11.37% of the portfolio extended the maturity by average 2.7 years. The rest is due to portfolio amortisations and trading. All coverage tests are passing, the cushion on the class F test increased to1.7% from 1.1% and it is 0.74% above the 104% trigger set in the reinvestment criteria. The Fitch rated 'CCC' or below bucket has increased by EUR300,000 but in percentage terms it increased to 7.8% from 5.4%.

There is no defaulted asset as of the review date but two obligors have defaulted since the last review. EUR8.8m AVR was sold at 70.25%, which realised a EUR2.6m loss. EUR3.5m Truvo was restructured into a PIK facility, term loan and equity, which realised a EUR 1.1m loss.

The manager bought EUR60.6m assets at the end of 2014, which represents 31.7% of the current performing portfolio. Although the performing portfolio balance decreased by EUR82m, the concentration of the portfolio did not increase significantly, with the top 10 obligor concentration increasing to 53.6% from 45.8%. The largest industry is telecommunications, which represents 16.8% of the portfolio and the largest country exposure is Netherlands, with 17.95% exposure.

The class V notes are a combination of the class D notes and the equity tranche. The affirmation reflects the affirmation of the class D notes.

RATING SENSITIVITIES
Increasing the default rate by 1.25x to all assets in the portfolio would result in a downgrade of one notch for the class F notes. Reducing the recovery rate by 0.75x to all assets in the portfolio would result in a downgrade of the class F notes by one rating category.

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