OREANDA-NEWS. Fitch Ratings has affirmed the class A-1 and class E notes issued by ALM XII, Ltd./LLC (ALM XII) at 'AAAsf' and 'B-sf', respectively. The Rating Outlooks remain Stable. A detailed list of rating actions follows at the end of this rating action commentary.

KEY RATING DRIVERS
The affirmations are based on the stable performance of the underlying portfolio, the sufficient credit enhancement (CE) available to the notes, and the cushions available in the CLO's cash flow modeling results. As of the December 2015 trustee report, all collateral quality tests, concentration limitations and coverage tests are passing, and there are no defaulted assets in the portfolio. Fitch's cash flow analysis also indicates each class of notes is passing all nine interest rate and default timing scenarios at or above their current rating levels with cushions.

The loan portfolio par amount plus principal cash is approximately $774.6 million, compared to the target par balance of $770 million at closing in February 2015, resulting in a marginal increase in the CE levels. The weighted average spread (WAS) of the portfolio is 4.6%, versus a minimum WAS trigger of 3.7%, as reported by the trustee. The portfolio, excluding cash, is invested in 95.7% senior secured loans and 4.3% second lien loans, with approximately 90.4% of the portfolio having either strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.

The Stable Outlook for each class reflects the expectation that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio.

RATING SENSITIVITIES
The ratings of the notes may be sensitive to the following: asset defaults, significant negative credit migration, lower than historically observed recoveries for defaulted assets, and breaches of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of ALM XII, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities. Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on Feb. 26, 2015.

ALM XII is an arbitrage cash flow collateralized loan obligation (CLO) that is managed by Apollo Credit Management (CLO), LLC. The transaction remains in its reinvestment period, which is scheduled to end in April 2019.

This review was conducted under the framework described in the report 'Global Rating Criteria for CLOs and Corporate CDOs' using Fitch's Portfolio Credit Model (PCM) to project future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various combinations of default timing and interest rate stress scenarios, as described in the report. The cash flow model was customized to reflect the transaction's structural features.

DUE DILIGENCE USAGE
No third-party due diligence was reviewed in relation to this rating action.

Fitch has affirmed the following ratings:

-- $492,750,000 class A-1 notes at 'AAAsf'; Outlook Stable;
-- $11,500,000 class E notes at 'B-sf'; Outlook Stable.

Fitch does not rate the class A-2a, A-2b B, C-1, C-2, D, and subordinated notes.