Ratings Affirmed On Harbourmaster Pro-Rata CLO 2's Class A1 VFN And Class A1 Cash Flow CLO Notes Following Review
OVERVIEW
- Following our analysis of Harbourmaster Pro-Rata CLO 2's performance, we have affirmed our 'AAA (sf)' ratings on the class A1 variable funding notes and the class A1 notes.
- Harbourmaster Pro-Rata CLO 2 is a cash flow CLO transaction that closed in August 2006 and securitizes loans to primarily speculative-grade corporate firms.
LONDON (Standard & Poor's) Sept. 18, 2014--Standard & Poor's Ratings Services today affirmed its 'AAA (sf)' credit ratings on Harbourmaster Pro-Rata CLO 2 B.V.'s class A1 variable funding notes (VFN) and class A1 notes (see list below).
Today's affirmations follow our assessment of the transaction's performance and take into account recent developments in the transaction.
For our review, we used data from the trustee report dated July 31, 2014. We have considered recent developments in the transaction and have applied our relevant criteria (see "Related Criteria").
From our analysis, we have observed a positive rating migration in the portfolio's credit quality since our previous review of the transaction (see " Ratings Raised On Harbourmaster Pro-Rata CLO 2's VFN And Class A1 Cash Flow CLO Notes Following Review," published on Nov. 30, 2012). We have also observed a decrease in the proportion of assets that we consider to be rated in the 'CCC' category ('CCC+', 'CCC', and 'CCC-') to 5.88% from 8.03%. At the same time, we have observed a decrease in the proportion of defaulted assets (those rated 'CC', 'SD' [selective default], and 'D') to 0.80% from 3.13% of the portfolio balance. The weighted-average spread earned on the collateral pool has increased to 3.95% from 3.58% since our previous review.
We subjected the capital structure to a cash flow analysis to determine the break-even default rate (BDR) for each rated tranche at each rating level. The BDR represents Standard & Poor's estimate of the maximum level of gross defaults, based on our stress assumptions, that a tranche can withstand and still fully repay the noteholders. In our analysis, we have used the reported weighted-average spread and the weighted-average recovery rates calculated in line with our corporate collateralized debt obligation (CDO) criteria (see " Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Aug. 1, 2014). We have applied various cash flow stresses, using alternative default patterns, and timings for each liability rating category, in conjunction with different interest rate stresses.
At closing, Harbourmaster Pro-Rata CLO 2 entered into swap transactions to mitigate currency risks in the transaction. We consider that the documentation for these swap transactions does not fully comply with our current counterparty criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013). We conducted our cash flow analysis assuming that the transaction does not benefit from such hedging mechanisms as the downgrade provisions outlined in the hedge agreement do not comply with our counterparty criteria.
Taking these factors into account in our credit and cash flow analysis, we consider the available credit enhancement for the class A1 VFN and the class A1 notes to be commensurate with our 'AAA (sf)' ratings. We have therefore affirmed our ratings on these classes of notes.
Harbourmaster Pro-Rata CLO 2 is a cash flow collateralized loan obligation (CLO) transaction that closed in August 2006 and securitizes loans to primarily speculative-grade corporate firms. The reinvestment period for this transaction ended in October 2013. The transaction is managed by Blackstone/GSO Debt Funds Europe Ltd.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties, and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties, and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at http://standardandpoorsdisclosure-17g7.com.
RELATED CRITERIA AND RESEARCH
Related Criteria
- Criteria - Structured Finance - CDOs: Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs - August 01, 2014
- Criteria - Structured Finance - CDOs: Mapping A Third Party's Internal Credit Scoring System To Standard & Poor's Global Rating Scale - May 08, 2014
- Criteria - Structured Finance - General: Counterparty Risk Framework Methodology And Assumptions - June 25, 2013
- General Criteria: Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions - June 14, 2011
- General Criteria: Understanding Standard & Poor's Rating Definitions - June 03, 2009
- Criteria - Structured Finance - CDOs: CDO Spotlight: General Cash Flow Analytics for CDO Securitizations - August 25, 2004
Related Research
- European Structured Finance Scenario And Sensitivity Analysis 2014: The Effects Of The Top Five Macroeconomic Factors, July 8, 2014
- Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014
- Ratings Raised On Harbourmaster Pro-Rata CLO 2's VFN And Class A1 Cash Flow CLO Notes Following Review, Nov. 30, 2012
RATINGS LIST
Harbourmaster Pro-Rata CLO 2 B.V. EUR641 mil fixed- and floating-rate notes Rating Class Identifier To From A1 VFN AAA (sf) AAA (sf) A1 XS0262176364 AAA (sf) AAA (sf)
Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
Primary Credit Analyst: | Abhijit Pawar, London (44) 20-7176-3774; abhijit.pawar@standardandpoors.com |
Secondary Contacts: | Matthew Jones, London (44) 20-7176-3591; matthew.jones@standardandpoors.com |
Vanessa Cecillon, London (44) 20-7176-3581; vanessa.cecillon@standardandpoors.com | |
Timon P Binder, Frankfurt (49) 69-33-999-139; timon.binder@standardandpoors.com | |
Additional Contact: | Structured Finance Europe; StructuredFinanceEurope@standardandpoors.com |
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