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Rating Action:

Moody's assigns definitive ratings to the eight classes of notes issued by OZLME II Designated Activity Company

Global Credit Research - 14 Sep 2017

Frankfurt am Main, September 14, 2017 -- Moody's Investors Service ("Moody's"), announced that it has assigned the following definitive ratings to notes issued by OZLME II Designated Activity Company ("OZLME II" or the "Issuer"):

....EUR 225,000,000 Class A-1 Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aaa (sf)

....EUR 10,000,000 Class A-2 Senior Secured Fixed Rate Notes due 2030, Definitive Rating Assigned Aaa (sf)

....EUR 35,500,000 Class B-1 Senior Secured Floating Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf)

....EUR 20,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2030, Definitive Rating Assigned Aa2 (sf)

....EUR 24,500,000 Class C Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned A2 (sf)

....EUR 20,500,000 Class D Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Baa2 (sf)

....EUR 23,300,000 Class E Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned Ba2 (sf)

....EUR 11,800,000 Class F Senior Secured Deferrable Floating Rate Notes due 2030, Definitive Rating Assigned B2 (sf)

RATINGS RATIONALE

Moody's definitive ratings of the rated notes address the expected loss posed to noteholders by the legal final maturity of the notes in 2030. The definitive ratings reflect the risks due to defaults on the underlying portfolio of loans given the characteristics and eligibility criteria of the constituent assets, the relevant portfolio tests and covenants as well as the transaction's capital and legal structure. Furthermore, Moody's is of the opinion that the collateral manager, Och-Ziff Europe Loan Management Limited ("Och-Ziff") has sufficient experience and operational capacity and is capable of managing this CLO.

OZLME II is a managed cash flow CLO. At least 90% of the portfolio must consist of senior secured loans and senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, mezzanine obligations and high yield bonds. The portfolio is expected to be at least 72% ramped up as of the closing date and to be comprised predominantly of corporate loans to obligors domiciled in Western Europe.

Och-Ziff will manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk and credit improved obligations, and are subject to certain restrictions.

In addition to the eight classes of notes rated by Moody's, the Issuer will issue EUR44.65M of subordinated notes which are not rated.

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. In connection with an optional redemption in whole, this CLO also gives discretion to Och-Ziff to designate excess principal proceeds as interest proceeds prior to the relevant redemption date. In order to derive the excess par amount, the transaction does not adjust for defaulted and impaired collateral which exposes noteholders to the risk of a potential shortfall in principal proceeds required for the optional redemption in whole following such designation by the manager.

Loss and Cash Flow Analysis:

Moody's modelled the transaction using CDOEdge, a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in August 2017. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders.

Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's encompasses the assessment of stressed scenarios.

Par amount: EUR 400,000,000

Diversity Score: 43

Weighted Average Rating Factor (WARF): 2800

Weighted Average Spread (WAS): 3.75%

Weighted Average Coupon (WAC): 5.0%

Weighted Average Recovery Rate (WARR): 42.0%

Weighted Average Life (WAL): 8 years

Stress Scenarios:

Together with the set of modelling assumptions above, Moody's conducted additional sensitivity analysis, which was an important component in determining the definitive ratings assigned to the rated notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on each of the rated notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal.

Percentage Change in WARF: WARF + 15% (to 3220 from 2800)

Ratings Impact in Rating Notches:

Class A-1 Senior Secured Floating Rate Notes: 0

Class A-2 Senior Secured Fixed Rate Notes: 0

Class B-1 Senior Secured Floating Rate Notes: -2

Class B-2 Senior Secured Fixed Rate Notes: -2

Class C Senior Secured Deferrable Floating Rate Notes: -2

Class D Senior Secured Deferrable Floating Rate Notes: -2

Class E Senior Secured Deferrable Floating Rate Notes: -1

Class F Senior Secured Deferrable Floating Rate Notes: 0

Percentage Change in WARF: WARF +30% (to 3640 from 2800)

Ratings Impact in Rating Notches:

Class A-1 Senior Secured Floating Rate Notes: -1

Class A-2 Senior Secured Fixed Rate Notes: -1

Class B-1 Senior Secured Floating Rate Notes: -3

Class B-2 Senior Secured Fixed Rate Notes: -3

Class C Senior Secured Deferrable Floating Rate Notes: -4

Class D Senior Secured Deferrable Floating Rate Notes: -3

Class E Senior Secured Deferrable Floating Rate Notes: -2

Class F Senior Secured Deferrable Floating Rate Notes: -2

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2017. 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 rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Och-Ziff's investment decisions and management of the transaction will also affect the notes' performance.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1091110.

Moody's describes its loss and cash flow analysis in the section "Ratings Rationale" of this press release.

Moody's describes the stress scenarios it has considered for this rating action in the section "Ratings Rationale" of this press release.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Wei Jiao
Asst Vice President - Analyst
Structured Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Carole Gintz
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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