Fitch Ratings has affirmed the class A notes and upgraded the Combination Notes in
The Rating Outlooks for both tranches are Stable.
RATING ACTIONS
Entity / Debt
Rating
Prior
A 61034HAA2
LT
AAAsf
Affirmed
AAAsf
Combination Notes 61034LAE5
LT
AAsf
Upgrade
A+sf
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VIEW ADDITIONAL RATING DETAILS
Transaction Summary
KEY RATING DRIVERS
The upgrade of Monroe VI's combination notes is driven by paydowns of 6.2% of their original balance since last rating action, contributing to a total paydown of 29.9% of their original balance since closing.
Asset Credit Quality, Asset Security, Portfolio Management and Portfolio Composition
The ongoing deleveraging is expected to offset increasing portfolio concentration and deterioration in credit quality. Fitch WARF (weighted average rating factor) increased to 33.0 based on
As of the
The deal is failing the
Cash Flow Analysis
The impact of the deleveraging was considered in the cash flow modelling.
Monroe Vi exited its reinvestment period in
The ratings on the class A notes are in line with the model-implied rating (MIR) as defined in the criteria, but for the combination securities, two notches below MIR. This is due to potential negative migration of the collateral, given the exposure to issuers on outlook negative and Fitch's watchlist.
The Stable Outlooks reflect Fitch's expectation that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with the class's ratings.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Downgrades may occur if realized and projected losses of the portfolio are higher than what was assumed at closing and the notes' credit enhancement (CE) do not compensate for the higher loss expectation than initially anticipated.
A 25% increase of the mean default rate across all ratings, along with a 25% decrease of the recovery rate at all rating levels for the current portfolio, would lead to no rating change for the class A notes and a downgrade of two notches for the combination notes.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Except for the tranches already at the highest 'AAAsf' rating, upgrades may occur in the event of better-than-expected portfolio credit quality and transaction performance.
A 25% reduction of the mean default rate across all ratings, along with a 25% increase of the recovery rate at all rating levels for the current portfolio, would lead to upgrades of two notches for the combination notes.
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
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 European securities and markets authority-registered rating agencies. Fitch has relied on the practices of the relevant groups within Fitch and/or other rating agencies to assess the asset portfolio information or information on the risk-presenting entities.
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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