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Rating Action:

Moody's assigns ratings to five classes of notes issued by MJX Venture Management II LLC

Global Credit Research - 15 Feb 2018

New York, February 15, 2018 -- Moody's Investors Service ("Moody's") has assigned ratings to five classes of notes issued by MJX Venture Management II LLC (the "Issuer" or "MJX VM II").

Moody's rating action is as follows:

U.S.$19,275,000 Series H/Class A Notes due 2031 (the "Class A Notes"), Assigned Aaa (sf)

U.S.$3,375,000 Series H/Class B Notes due 2031 (the "Class B Notes"), Assigned Aa1 (sf)

U.S.$1,875,000 Series H/Class C Notes due 2031 (the "Class C Notes"), Assigned A1 (sf)

U.S.$1,675,000 Series H/Class D Notes due 2031 (the "Class D Notes"), Assigned A2 (sf)

U.S.$1,500,000 Series H/Class E Notes due 2031 (the "Class E Notes"), Assigned Baa3 (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," and are the eighth series of issuance by the Issuer in a program of financing for CLOs.

RATINGS RATIONALE

Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The 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.

MJX VM II is the collateral manager of Venture XXII CLO, Limited (the "Underlying CLO"). The issued notes will be collateralized primarily by broadly syndicated senior secured corporate loans. The proceeds from the issuance of the Rated Notes will be used to finance the purchase of a 5% vertical slice of the Class A-R Notes, Class B-R Notes, Class C-R Notes, Class D-R Notes and Class E-R Notes (the "Underlying CLO Notes") issued by the Underlying CLO, in order for the Issuer to comply with the retention requirements of both the US and EU Risk Retention Rules.

MJX VM II also acts as "originator" (as defined in the EU Risk Retention Rules) of a part of the assets of the Underlying CLO (the "Originated Assets"). As a result, MJX VM II is exposed to potential credit and market value risk of the Originated Assets during a holding period from the time the Issuer purchases the Originated Assets in the market by until the Originated Assets are sold from the Issuer to the Underlying CLO. To mitigate these risks, the Issuer incorporates (i) a substantial cash reserve in an escrow account to cover any potential losses during the holding period and until the Originated Assets settle into the CLO and (ii) minimum industry diversity and rating requirements for the Originated Assets.

The Rated Notes are collateralized primarily by the Underlying CLO Notes and 5% of the Underlying CLO's subordinated notes . In addition, the Rated Notes benefit from additional credit enhancement provided by (i) 50% of the senior management fees from the Underlying CLO (the "Pledged Management Fee"), (ii) 0.035% of the senior management fees from the Underlying CLO and (iii) in the event the Rated Notes experience a default, certain excess collections from other, non-defaulted Series of notes issued by the Issuer.

On each payment date, each class of Rated Notes will receive an interest payment equal to 5% of the interest payment paid to the entire class of the related Underlying CLO Notes plus a supplemental amount. In the event of a permitted refinancing or re-pricing, the respective interest amount each class of Rated Notes receives will be reduced by the amount the respective refinancing or re-pricing reduced the interest rates on the Underlying CLO Notes.

The Issuer's priority of payments includes an interest trapping mechanism following the occurrence of certain events (the "Cash-Trap Events"). Upon a Cash-Trap Event, after payment of interest on the Rated Notes, all remaining interest proceeds from the Underlying CLO Notes and the Pledged Management Fee will be trapped in a cash-trap account. Cash-Trap Events include, but are not limited to, failure of an overcollateralization test, deferral of interest on certain Underlying CLO Notes, and certain collateral manager-related events. Unless the Cash-Trap Event is cured, amounts in the cash-trap account will be applied to repay the Rated Notes at maturity or redemption.

Although the Rated Notes constitute full recourse indebtedness of the Issuer, the holders of the Rated Notes have no right to foreclose upon the assets of the Issuer's other Series and have limited rights to assets constituting excess collections from other Series. Holders of other Series of Debt of the Issuer are likewise precluded from foreclosing on the assets of the Rated Notes and are limited in their rights to excess collections from the Rated Notes. In addition to a variety of other factors, our analysis of the Issuer's bankruptcy remoteness took into account a substantive consolidation legal opinion. The opinion provided comfort that the Issuer's structure and separateness features minimize the risk that a bankruptcy court would order the consolidation of the assets and liabilities of Issuer's parent and the Issuer.

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: $597,945,305

Defaulted Par: $4,109,391

Diversity Score: 80

Weighted Average Rating Factor (WARF): 2910

Weighted Average Spread (WAS): 3.60%

Weighted Average Coupon (WAC): 6.00%

Weighted Average Recovery Rate (WARR): 47.0%

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 2910 to 3347)

Rating Impact in Rating Notches

Class A Notes: 0

Class B Notes: 0

Class C Notes: 0

Class D Notes: -2

Class E Notes: -1

Percentage Change in WARF -- increase of 30% (from 2910 to 3783)

Rating Impact in Rating Notches

Class A Notes: 0

Class B Notes: -2

Class C Notes: -2

Class D Notes: -4

Class E Notes: -2

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_1112587

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.

Shan Lai
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

Algis Remeza
Associate Managing Director
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

No Related Data.
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