New York, April 06, 2021 -- Moody's Investors Service ("Moody's") has assigned
a rating to one class of CLO refinancing notes (the "Refinancing
Notes") issued by LCM XV Limited Partnership (the "Issuer").
Moody's rating action is as follows:
U.S.$387,000,000 Class A-R2 Senior
Floating Rate Notes Due 2030 (the "Class A-R2 Notes"), Assigned
Aaa (sf)
Additionally, Moody's has taken rating action on the following outstanding
notes originally issued by the Issuer in May 2017:
U.S.$63,000,000 Class B-R Senior
Floating Rate Notes Due 2030 (the "Class B-R Notes"),
Upgraded to Aa1 (sf); previously on May 25, 2017 Assigned Aa2
(sf)
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.
The Issuer is a managed cash flow collateralized loan obligation (CLO).
The issued notes are collateralized primarily by a portfolio of broadly
syndicated senior secured corporate loans.
LCM Asset Management LLC (the "Manager") will continue to 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 remaining reinvestment period.
The Issuer previously issued four other classes of secured notes and one
class of subordinated notes, which will remain outstanding.
In addition to the issuance of the Refinancing Notes, a variety
of other changes to transaction features will occur in connection with
the refinancing. These include extension of the non-call
period, the inclusion of alternative benchmark replacement provisions,
and change to the definition of "Moody's Default Probability
Rating".
Moody's rating action on the Class B-R Notes is primarily
a result of the refinancing, which increases excess spread available
as credit enhancement to the rated notes. Additionally, the
Notes benefited from a shortening of the weighted average life (WAL).
Moody's modeled the transaction using a cash flow model based on the Binomial
Expansion Technique, as described in "Moody's Global Approach to
Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted average
recovery rate, are based on its published methodology and could
differ from the trustee's reported numbers. For modeling purposes,
Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $583,391,069
Defaulted par: $1,577,939
Diversity Score: 90
Weighted Average Rating Factor (WARF): 2883
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
3.19%
Weighted Average Recovery Rate (WARR): 48.30%
Weighted Average Life (WAL): 5.35 years
In consideration of the current high uncertainties around the global economy,
and the ultimate performance of the CLO portfolio, Moody's
conducted a number of additional sensitivity analyses representing a range
of outcomes that could diverge, both to the downside and the upside,
from our base case. Some of the additional scenarios that Moody's
considered in its analysis of the transaction include, among others:
additional near-term defaults of companies facing liquidity pressure;
an additional cashflow analysis assuming a lower WAS to test the sensitivity
to LIBOR floors; sensitivity analysis on deteriorating credit quality
due to a large exposure to loans with negative outlook, and a lower
recovery rate assumption on defaulted assets to reflect declining loan
recovery rate expectations.
The coronavirus pandemic has had a significant impact on economic activity.
Although global economies have shown a remarkable degree of resilience
to date and are returning to growth, the uneven effects on individual
businesses, sectors and regions will continue throughout 2021 and
will endure as a challenge to the world's economies well beyond
the end of the year. While persistent virus fears remain the main
risk for a recovery in demand, the economy will recover faster if
vaccines and further fiscal and monetary policy responses bring forward
a normalization of activity. As a result, there is a heightened
degree of uncertainty around our forecasts. Our analysis has considered
the effect on the performance of corporate assets from a gradual and unbalanced
recovery in the US economic activity.
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 Manager's investment decisions
and management of the transaction will also affect the performance of
the rated notes.
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_1274866.
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.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK 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.
Silin Yang, CFA
Asst Vice President - 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 Ham
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
