MOODY'S CORPORATION Fitch Ratings has upgraded Man GLG Euro CLO II DAC's class B notes and revised the Outlooks on the class C to F notes to Stable from Positive.
A full list of rating actions is detailed below.
RATING ACTIONS
Entity / Debt
Rating
Prior
Man GLG Euro CLO II DAC
A-1-R XS2034711064
LT
AAAsf
Affirmed
AAAsf
A-2 XS1516363576
LT
AAAsf
Affirmed
AAAsf
B XS1516362685
LT
AAAsf
Upgrade
AA+sf
C-R XS2034711734
LT
A+sf
Affirmed
A+sf
D XS1516363733
LT
BBB+sf
Affirmed
BBB+sf
E XS1516363063
LT
BB+sf
Affirmed
BB+sf
F XS1516363147
LT
B+sf
Affirmed
B+sf
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VIEW ADDITIONAL RATING DETAILS
Transaction Summary
Man GLG Euro CLO II DAC is a cash flow collateralised loan obligation (CLO). The underlying portfolio of assets mainly consists of leveraged loans and is managed by
KEY RATING DRIVERS
Increased Credit Enhancement: The transaction exited its reinvestment period in
The trade date principal cash balance was
Given the manager is unlikely to reinvest, Fitch has assessed the transaction by notching down one level all assets in the current portfolio with Fitch-derived ratings (FDR) on Negative Outlook
Limited Deleveraging Prospect: The Stable Outlooks on all notes reflect Fitch's expectation that deleveraging of the notes would be constrained in the next 12-18 months by the small portion of assets maturing by 2023 and limited prepayment expectation in the current uncertain macroeconomic environment.
Resilient Asset Performance: The transaction's metrics indicate resilient asset performance, which together with increased credit enhancement, led to today's rating actions. This is despite the transaction is currently 3.6% below par and continues to fail its Fitch's 'CCC' limit,
'B'/'B-' Portfolio: Fitch assesses the average credit quality of the obligors at 'B'/'B-'. The Fitch-calculated WARF of the current portfolio was 25.99 and based on the notching stress for assets on Negative Outlook was 27.43.
High Recovery Expectations: Senior secured obligations comprise 98.3% of the portfolio. Fitch views the recovery prospects for these assets as more favourable than for second-lien, unsecured and mezzanine assets. The Fitch-calculated weighted average recovery rate (WARR) of the current portfolio as reported by the trustee was 64.5%.
Diversified Portfolio Despite Amortisation: The portfolio has repaid
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A 25% increase of the mean default rate (RDR) across all ratings and a 25% decrease of the recovery rate (RRR) across all ratings of the current portfolio would have no impact to class A-1-R, A-2 and C-R notes and would lead to downgrades of no more than four notches for the class B, D, E and F notes.
Downgrades, which are based on the current portfolio, may occur if the loss expectation is larger than initially assumed, due to unexpectedly high levels of defaults and portfolio deterioration. Due to the better WARF of the current portfolio than that of the stressed portfolio, the class D notes display a rating cushion of one notch while other classes of notes have no rating cushion.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
A 25% reduction of the mean RDR across all ratings and a 25% increase in the RRR across all ratings of the Fitch current portfolio stressed for obligors with a Negative Outlook would lead to upgrades of up to three notches for the rated notes, except for the 'AAAsf' notes.
Upgrades, except for the 'AAAsf' notes, may occur on stable portfolio credit quality and deleveraging, leading to higher credit enhancement and excess spread available to cover losses in the remaining portfolio.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
DATA ADEQUACY
Man GLG Euro CLO II DAC
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. 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 or risk presenting entities have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action
Overall, and together with any assumptions referred to above, 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.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Additional information is available on www.fitchratings.com
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