Frankfurt am Main, November 26, 2020 -- Moody's Investors Service ("Moody's") announced that it has assigned the
following provisional ratings to notes to be issued by Toro European CLO
7 DAC (the "Issuer"):
....EUR 1,750,000 Class X Secured
Floating Rate Notes due 2034, Assigned (P)Aaa (sf)
....EUR 192,000,000 Class A Secured
Floating Rate Notes due 2034, Assigned (P)Aaa (sf)
....EUR 16,000,000 Class B-1
Secured Floating Rate Notes due 2034, Assigned (P)Aa2 (sf)
....EUR 14,950,000 Class B-2
Secured Fixed Rate Notes due 2034, Assigned (P)Aa2 (sf)
....EUR 21,300,000 Class C Secured
Deferrable Floating Rate Notes due 2034, Assigned (P)A2 (sf)
....EUR 21,350,000 Class D Secured
Deferrable Floating Rate Notes due 2034, Assigned (P)Baa3 (sf)
....EUR 22,400,000 Class E Secured
Deferrable Floating Rate Notes due 2034, Assigned (P)Ba3 (sf)
....EUR 7,450,000 Class F Secured
Deferrable Floating Rate Notes due 2034, Assigned (P)B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on a consideration of the risks
associated with the CLO's portfolio and structure as described in
our methodology.
The Issuer is a managed cash flow CLO. At least 92.5%
of the portfolio must consist of senior secured obligations and up to
7.5% of the portfolio may consist of senior unsecured obligations,
second-lien loans, mezzanine obligations and high yield bonds.
The portfolio is expected to be 50% ramped as of the closing date
and to comprise of predominantly corporate loans to obligors domiciled
in Western Europe. The remainder of the portfolio will be acquired
during the 6-month ramp-up period in compliance with the
portfolio guidelines.
Chenavari Credit Partners LLP 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 3.2-year reinvestment
period. Thereafter, subject to certain restrictions,
purchases are permitted using principal proceeds from unscheduled principal
payments and proceeds from sales of credit risk obligations or credit
improved obligations.
Interest and principal amortisation amounts due to the Class X Notes are
paid pro rata with payments to the Class A Notes. The Class X Notes
amortise by 12.5% or EUR 218,750 over eight payment
dates starting on the 2nd payment date.
In addition to the eight classes of notes rated by Moody's, the
Issuer will issue EUR31.5 million of Subordinated Notes due 2034
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.
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 European 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 August 2020 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1235535.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Please note that a Request for Comment was published in which Moody's
requested market feedback on potential revisions to one or more of the
methodologies used in determining these Credit Ratings. If the
revised methodologies are implemented as proposed, it is not currently
expected that the Credit Ratings referenced in this press release will
be affected.
Request for Comments can be found on the rating methodologies page on
www.moodys.com.
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.
The collateral manager's investment decisions and management of the transaction
will also affect the notes' performance.
Moody's modeled the transaction using 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 2020.
Moody's used the following base-case modeling assumptions:
Par Amount: EUR 320,000,000
Diversity Score: 42
Weighted Average Rating Factor (WARF): 2950
Weighted Average Spread (WAS): 3.85%
Weighted Average Coupon (WAC): 4.00%
Weighted Average Recovery Rate (WARR): 44.0%
Weighted Average Life (WAL): 8.0 years
Moody's has addressed the potential exposure to obligors domiciled in
countries with local currency ceiling (LCC) of A1 or below. As
per the portfolio constraints and eligibility criteria, exposures
to countries with LCC of A1 to A3 cannot exceed 10% and obligors
cannot be domiciled in countries with LCC below A3.
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_1254549.
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_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
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.
Andreas Hellmut Botterbusch, CFA
VP - Senior 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
Volker Gulde
Senior Vice President/Manager
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
