New York, December 16, 2020 -- Moody's Investors Service ("Moody's") has assigned definitive
ratings to four classes of notes issued by Cerberus Loan Funding XXX L.P.
(the "Issuer" or "Cerberus Loan Funding XXX").
Moody's rating action is as follows:
U.S.$182,000,000 Class A Senior Secured
Floating Rate Notes due 2033 (the "Class A Notes"), Definitive Rating
Assigned Aaa (sf)
U.S.$28,000,000 Class B Senior Secured
Floating Rate Notes due 2033 (the "Class B Notes"), Definitive Rating
Assigned Aa2 (sf)
U.S.$35,000,000 Class C Secured Deferrable
Floating Rate Notes due 2033 (the "Class C Notes"), Definitive Rating
Assigned A3 (sf)
U.S.$17,500,000 Class D Secured Deferrable
Floating Rate Notes due 2033 (the "Class D Notes"), Definitive Rating
Assigned Baa3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes,
and the Class D Notes are referred to herein, collectively,
as the "Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on our methodology and considers
all relevant risks, particularly those associated with the CLO's
portfolio and structure.
Cerberus Loan Funding XXX is a managed cash flow CLO. The issued
notes will be collateralized primarily by small and medium enterprise
loans. At least 80% of the portfolio must consist of first
lien loans, cash and eligible investments, and up to 20%
of the portfolio may consist of second lien loans. The portfolio
is approximately 100% ramped as of the closing date.
Cerberus Business Finance, LLC (the "Servicer") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including discretionary
trading, during the transaction's three year reinvestment period.
Thereafter, the Servicer may not reinvest in new assets and all
principal proceeds, including sale proceeds and unscheduled principal
payments, will be used to amortize the debt in accordance with the
priority of payments.
In addition to the Rated Notes, the Issuer issued partnership interests.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on the Binomial
Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan Obligations"
rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $350,000,000
Diversity Score: 30
Weighted Average Rating Factor (WARF): 4095
Weighted Average Spread (WAS): 6.50%
Weighted Average Coupon (WAC): 8.0%
Weighted Average Recovery Rate (WARR): 40.0%
Weighted Average Life (WAL): 8.0 years
On the closing date, a small percentage of the portfolio will consist
of loans for which the Issuer has not yet obtained Moody's credit estimates,
but based on the information received we expect that Moody's will assign
credit estimates to these loans when sufficient information becomes available.
In determining our base-case assumptions, we assumed that
such loans have rating factors commensurate with credit estimates that
are lower than the average credit estimate of the loans in the closing
portfolio. In addition, our rating analysis included stress
scenarios in which we assumed a rating factor commensurate with a Caa3
rating for certain concentrations of such loans.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of corporate assets from
the current weak U.S. economic activity and a gradual recovery
for the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global Approach
to Rating Collateralized Loan Obligations" published in December 2020
and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1242167.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and credit
conditions that may change. The Servicer's investment decisions
and management of the transaction will also affect the performance of
the Rated Notes.
Further details regarding Moody's analysis of this transaction may be
found in the related pre-sale report, available on Moodys.com.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1256594.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Xhensila Pisha
Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
David H. Burger
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
