Kroll Bond Rating Agency Europe Limited (KBRA) assigns preliminary ratings to five classes of notes issued by CVC Cordatus Loan Fund XVII DAC, a cash flow collateralised loan obligation (CLO) back by a diversified portfolio of Euro-denominated corporate loans.
CVC Cordatus Loan Fund XVII DAC is a CLO managed by CVC Credit Partners European CLO Management LLP ("CVC Europe" or the "collateral manager"). The CLO will have a three-year reinvestment period and the legal final maturity is 18 December 2032. The ratings reflect initial credit enhancement levels, coverage tests including par value and interest coverage tests, excess spread, and an interest diversion test.
The collateral in CVC Cordatus Loan Fund XVII DAC will mainly consist of broadly syndicated leveraged loans issued by corporate obligors diversified across sectors. The obligors in the portfolio have a K-WARF of 2498, which represents a weighted average portfolio assessment of approximately B. The target portfolio par amount is €280.0 million with exposures to 90 obligors.
CVC Europe is the European CLO management arm of CVC Credit Partners, a global investment management firm created in 2012 as the result of the merger between CVC Cordatus (Europe) and Apidos Capital Management (US). CVC Europe was capitalised by CVC Global and established in 2016 for European risk retention purposes. While CVC Europe will primarily be responsible for credit decisions and management of the CLO portfolio, certain research and middle/back-office personnel and services will be provided by CVC Credit Partners through shared services agreements.
The social and economic fallout from the novel coronavirus (COVID-19) pandemic will impact different corporate sectors to varying degrees but broadly, we expect intense pressure on certain cyclical and other non-defensive sectors, with the adverse effects broadening and deepening as the economic dislocation continues. To address this, KBRA considered several scenarios to assess the impact of potential credit migration due to COVID-19.
The preliminary ratings on the Class A and B Notes consider the timely payment of interest and ultimate payment of principal by the applicable stated maturity date, while its ratings on the Class C, D, and E notes consider the ultimate payment of interest and principal.
KBRA analysed the transaction using Structured Credit Global Rating Methodology published on 13 March 2020 and the and the Global Structured Finance Counterparty Methodology published on August 8, 2018.
- KBRA’s Structured Credit 101: Collateralized Loan Obligations
- KBRA’s Structured Credit 401: Primer on Combination Notes
- Structured Credit Global Rating Methodology
- Par Wars: Attack on the Loans
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the EU Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the EU Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA Europe
KBRA Europe is a full-service credit rating agency (CRA) registered with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency, Inc. (KBRA) is a CRA registered as an NRSRO with the U.S. Securities and Exchange Commission and is a certified CRA with ESMA. KBRA is also recognized by the U.S. National Association of Insurance Commissioners as a Credit Rating Provider and is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.
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