New York, February 06, 2018 -- Moody's Investors Service ("Moody's") has assigned provisional
ratings to five classes of notes to be issued by CIFC Funding 2018-I,
Ltd. (the "Issuer" or "CIFC Funding 2018-I").
Moody's rating action is as follows:
U.S.$650,000,000 Class A Senior Secured
Floating Rate Notes due 2031 (the "Class A Notes"), Assigned (P)Aaa
(sf)
U.S.$110,000,000 Class B Senior Secured
Floating Rate Notes due 2031 (the "Class B Notes"), Assigned (P)Aa2
(sf)
U.S.$55,000,000 Class C Mezzanine Secured
Deferrable Floating Rate Notes due 2031 (the "Class C Notes"), Assigned
(P)A2 (sf)
U.S.$60,000,000 Class D Mezzanine Secured
Deferrable Floating Rate Notes due 2031 (the "Class D Notes"), Assigned
(P)Baa3 (sf)
U.S.$45,000,000 Class E Junior Secured
Deferrable Floating Rate Notes due 2031 (the "Class E Notes"), Assigned
(P)Ba3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes,
the Class D Notes and the Class E Notes are referred to herein,
collectively, as the "Rated Notes."
Moody's issues provisional ratings in advance of the final sale of financial
instruments, but these ratings only represent Moody's preliminary
credit opinions. Upon a conclusive review of a transaction and
associated documentation, Moody's will endeavor to assign definitive
ratings. A definitive rating, if any, may differ from
a provisional rating.
RATINGS RATIONALE
Moody's provisional ratings of the Rated Notes address the expected losses
posed to noteholders. The provisional ratings reflect the risks
due to defaults on the underlying portfolio of assets, the transaction's
legal structure, and the characteristics of the underlying assets.
CIFC Funding 2018-I is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio
must consist of first lien senior secured loans and eligible investments,
and up to 7.5% of the portfolio may consist of second lien
loans and unsecured loans. We expect the portfolio to be approximately
70% ramped as of the closing date.
CIFC CLO Management II LLC (the "Manager") 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 five year reinvestment period. Thereafter,
the Manager may reinvest unscheduled principal payments and proceeds from
sales of credit risk assets, subject to certain restrictions.
In addition to the Rated Notes, the Issuer will issue subordinated
notes.
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 August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $1,000,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2875
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9.0 years
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 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 Manager's investment decisions
and management of the transaction will also affect the performance of
the Rated Notes.
Together with the set of modeling assumptions above, Moody's conducted
an additional sensitivity analysis, which was a component in determining
the 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 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),
assuming that all other factors are held equal:
Percentage Change in WARF -- increase of 15% (from
2875 to 3306)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Percentage Change in WARF -- increase of 30% (from
2875 to 3738)
Rating Impact in Rating Notches
Class A Notes: -1
Class B Notes: -3
Class C Notes: -4
Class D Notes: -2
Class E Notes: -1
Further details regarding Moody's analysis of this transaction may be
found in the related pre-sale report, available soon 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 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_1108242.
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 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.
Maria Miagkova
Vice President - Senior 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
Danielle Nazarian
Senior Vice President
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