New York, June 23, 2010 -- Moody's Investors Service announced that it has assigned the following
ratings to the notes issued by ALM Loan Funding 2010-1, Ltd.
U.S. $215,400,000 Class A-1 Senior
Secured Floating Rate Notes due May 20, 2020, assigned Aaa
U.S. $11,100,000 Class A-2 Senior
Secured Floating Rate Notes due May 20, 2020, assigned Aa2
U.S. $24,700,000 Class B Senior Secured
Deferrable Floating Rate Notes due May 20, 2020, assigned
Moody's ratings of the notes address the ultimate cash receipt of all
required interest and principal payments required by the transaction's
governing documents, and are based on the expected loss posed to
the noteholders relative to the promise of receiving the present value
of such payments. The ratings reflect the risks due to defaults
on the underlying portfolio of collateral, the transaction's legal
structure, and the characteristics of the underlying assets.
ALM Loan Funding 2010-1, Ltd. is a managed cash-flow
CLO. The transaction is collateralized primarily by broadly syndicated
first lien senior secured corporate loans. At least 97.5%
of the portfolio must be invested in senior secured loans or eligible
investments and up to 2.5% of the underlying portfolio may
consist of senior secured bonds or senior secured floating rate notes.
Apollo Credit Management, LLC ( "Apollo Credit",
or the "Collateral Manager"), a wholly-owned subsidiary of
Apollo Global Management LLC, will manage the selection, acquisition
and disposition of collateral on behalf of the Issuer. Apollo Credit
may engage in trading activity during the transaction's two year reinvestment
period, including discretionary trading. Thereafter,
sales of securities that are defaulted, credit improved, or
credit risk are allowed; however, no purchases of additional
collateral debt securities are permitted.
In addition to the three tranches of rated notes, the Issuer issued
a single tranche of unrated subordinated notes. In accordance with
the respective priority of payments, interest and principal will
be paid to the rated notes in order of seniority prior to any payments
to the unrated subordinated notes. The transaction incorporates
par and interest coverage tests, which, when triggered,
divert interest and principal proceeds to pay down the rated notes sequentially
in order of seniority.
Solely for the purpose of the WARF calculation, our analysis treats
ratings of underlying collateral securities on "review for possible downgrade"
as if they were two notches lower and those with a "negative outlook"
as if they were one notch lower. Moody's also increased its default
probability assumption by 30%. For modeling purposes,
Moody's used the following base-case assumptions:
Diversity of 45
WARF (reflecting 30% default probability stress and notching as
described in the preceding paragraph) of 3686
Weighted Average Spread of 3%
Weighted Average Coupon of 9%
Weighted Average Recovery Rate of 44.375%
Weighted Average Life of 6 years.
Together with the refined set of modeling assumptions above, Moody's
conducted additional sensitivity analysis. Specifically,
the underlying portfolio allows for a large concentration of up to 16%
in one industry. We analyzed the effect of such concentration on
the ratings of the notes by application of the double-binomial
The V Score for this transaction is Medium/High. This V Score has
been assigned in a manner similar to the Medium/High V score assigned
for the global cash flow CLO sector, as described in the special
report titled, "V Scores and Parameter Sensitivities in the Global
Cash Flow CLO Sector," dated July 17, 2009, available
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability around the various inputs
to a rating determination. The V Score ranks transactions by the
potential for significant rating changes owing to uncertainty around the
assumptions due to data quality, historical performance, the
level of disclosure, transaction complexity, the modeling
and the transaction governance that underlie the ratings. V Scores
apply to the entire transaction, rather than individual tranches.
The revised assumptions that have been applied to all credits in the underlying
portfolio are described in the press release titled "Moody's updates key
assumptions for rating CLOs," dated February 4, 2009 and in
the publication titled "CLO Ratings Surveillance Brief --
Second Quarter 2009," dated July 17, 2009.
The principal methodology used in rating and monitoring the transaction
is the following publication, which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Moody's Approach to Rating Collateralized Loan Obligations (8/12/2009).
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Rating Methodologies sub-directory
on Moody's website. In addition, Moody's publishes a weekly
summary of structured finance credit, ratings and methodologies,
available to all registered users of our website, at www.moodys.com/SFQuickCheck.
Structured Finance Group
Moody's Investors Service
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Moody's assigns ratings to CLO notes issued by ALM Loan Funding 2010-1, Ltd.