OREANDA-NEWS. Fitch Ratings has upgraded Harvest CLO V plc's classes A-2 and B notes as follows:

Class A-R (No ISIN): affirmed at 'AAAsf'; Outlook Stable
Class A-D (ISIN XS0293379342): affirmed at 'AAAsf'; Outlook Stable
Class A-2 (ISIN XS0293379771): upgraded to 'AA+sf' from 'AAsf'; Outlook Stable
Class B (ISIN XS0293380191): upgraded to 'A+sf' from 'Asf'; Outlook Stable
Class C-1 (ISIN XS0293380274): affirmed at 'BBBsf'; Outlook Stable
Class C-2 (ISIN XS0293951280): affirmed at 'BBBsf'; Outlook Stable
Class D (ISIN XS0293380431): affirmed at 'BBsf'; Outlook Stable
Class E-1 (ISIN XS0293380514): affirmed at 'Bsf'; Outlook Stable
Class E-2 (ISIN XS0293952684): affirmed at 'Bsf'; Outlook Stable
Class Q (ISIN XS0293380944): affirmed at 'BB-sf'; Outlook Stable

Harvest CLO V is a securitisation of mainly senior secured, senior unsecured, second-lien and mezzanine loans (including revolvers). At closing a total note issuance of EUR650m was used to invest in a target portfolio of EUR632m. The portfolio is actively managed by 3i Debt Management Investments Limited.

KEY RATING DRIVERS
The upgrade of the class A-2 and B notes reflects the substantial increase in credit enhancement over the past 12 months due to the deleveraging of the portfolio. Despite the portfolio amortisation, it remains well diversified, with 130 assets from 98 obligors as of November 2015.

The credit quality of performing assets has improved since November 2014. The reported weighted average rating factor has decreased to 27.4 currently from 27.8 in November 2013, indicating an improvement in the credit quality of performing assets in the portfolio, with only one asset rated 'CCC' or below as of November 2015. One obligor defaulted in the last 12 months.

Following the end of the reinvestment period in May 2014, the manager is allowed reinvest unscheduled principal proceeds and proceeds from the sale of credit-improved and credit- impaired assets, subject to certain conditions. The manager is currently unable to reinvest any principal proceeds because of a breach of some of the portfolio profile tests and the class E over-collateralisation (OC) test level being below 108%.

The transaction is currently passing all OC tests. The OC test values have improved since November 2014, particularly at the senior level, due to the deleveraging of the transaction, which offsets the impact the additional default registered over the past year. All interest coverage tests are passing with significant buffers.

The transaction uses the multi-currency class A-R variable funding notes to hedge GBP and USD exposure. The main hedging strategy following the end of the reinvestment period involves matching senior note redemptions by currency so that GBP and USD principal proceeds are used to redeem GBP and USD-denominated class A-R drawings while euro principal proceeds are used to redeem euro-denominated senior liabilities, thus keeping the balance of GBP and USD-denominated assets and liabilities aligned. However, a skew of defaults or prepayment activity to assets denominated in a single currency can create a currency mismatch, introducing additional performance volatility for the transaction. Fitch considered the impact of a currency mismatch in its analysis.

RATING SENSITIVITIES
A 25% increase in the obligor default probability would lead to a downgrade of up to one notch for the rated notes.

A 25% reduction in expected recovery rates would lead to a downgrade of one notch for the rated notes.

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 at 30 November 2015
-Transaction reporting provided by Deutsche Bank as at 30 November 2015.