TIKEHAU CAPITAL
Fitch Ratings has assigned expected ratings and Rating Outlooks to
RATING ACTIONS
Entity / Debt
Rating
A-1
LT
Expected Rating
A-2
LT
NR(EXP)sf
Expected Rating
B
LT
NR(EXP)sf
Expected Rating
C
LT
NR(EXP)sf
Expected Rating
D
LT
NR(EXP)sf
Expected Rating
E
LT
NR(EXP)sf
Expected Rating
Subordinated Notes
LT
NR(EXP)sf
Expected Rating
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VIEW ADDITIONAL RATING DETAILS
Transaction Summary
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the indicative portfolio is 'B', which is in line with that of recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, the class A-1 notes benefit from credit enhancement of 37.0% and standard
Asset Security (Positive): The indicative portfolio consists of 100% first-lien senior secured loans and has a weighted average recovery assumption of 78.0%. Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may comprise up to 39.0% of the portfolio balance in aggregate while the top five obligors can represent up to 12.5% of the portfolio balance in aggregate. The level of diversity required by industry, obligor and geographic concentrations is in line with other recent
Portfolio Management (Neutral): The transaction has a 5.1-year reinvestment period and reinvestment criteria similar to other
Cash Flow Analysis (Positive): Fitch used a customized proprietary cash flow model to replicate the principal and interest waterfalls and assess the effectiveness of various structural features of the transaction. In our stress scenarios, the class A-1 notes can withstand default rates of up to 64.3%, assuming a portfolio recovery rate of 39.5% in Fitch's 'AAAsf' scenario.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Variability in key model assumptions, such as decreases in recovery rates and increases in default rates, could result in a downgrade. Fitch evaluated the notes' sensitivity to potential changes in such a metric. The results under these sensitivity scenarios are between 'A-sf' and 'AAAsf' for class A-1.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Upgrade scenarios are not applicable to the class A-1 notes, as these notes are in the highest rating category of 'AAAsf'.
Key Rating Drivers and Rating Sensitivities are further described in the presale report, which is available to investors at www.fitchratings.com.
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.
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.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. Offering documents for this market sector do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. However, the offering document for this transaction included a draft of the indenture as an appendix, which contains RW&Es related to the underlying asset pool. For further information, please see Fitch's Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
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