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Rating Action:

Moody's assigns ratings to six classes of CLO refinancing notes issued by ALM XVI, Ltd.

29 Jun 2018

New York, June 29, 2018 -- Moody's Investors Service ("Moody's") has assigned ratings to six classes of CLO refinancing notes (the "Refinancing Notes") issued by ALM XVI, Ltd. (the "Issuer"):

Moody's rating action is as follows:

U.S.$682,000,000 Class A-1a-R2 Senior Secured Floating Rate Notes due 2027 (the "Class A-1a-R2 Notes"), Definitive Rating Assigned Aaa (sf)

U.S.$112,200,000 Class A-2-R2 Senior Secured Floating Rate Notes due 2027 (the "Class A-2-R2 Notes"), Definitive Rating Assigned Aa1 (sf)

U.S.$59,400,000 Class B-R2 Senior Secured Deferrable Floating Rate Notes due 2027 (the "Class B-R2 Notes"), Definitive Rating Assigned A2 (sf)

U.S.$73,150,000 Class C-R2 Senior Secured Deferrable Floating Rate Notes due 2027 (the "Class C-R2 Notes"), Definitive Rating Assigned Baa3 (sf)

U.S.$52,250,000 Class D-R2 Secured Deferrable Floating Rate Notes due 2027 (the "Class D-R2 Notes"), Definitive Rating Assigned Ba3 (sf)

U.S.$22,000,000 Class E-R2 Secured Deferrable Floating Rate Notes due 2027 (the "Class E-R2 Notes"), Definitive Rating Assigned B3 (sf)

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.

Apollo Credit Management (CLO), LLC (the "Manager") manages the CLO. It directs the selection, acquisition, and disposition of collateral on behalf of the Issuer.

RATINGS RATIONALE

Moody's ratings on the Refinancing 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.

The Issuer has issued the Refinancing Notes on June 29, 2018 (the "Second Refinancing Date") in connection with the refinancing of all classes of the secured notes (the "First Refinancing Notes") previously issued on July 17, 2017 (the "First Refinancing Date"). On the First Refinancing Date the Issuer issued the First Refinancing Notes and redeemed the notes (the "Refinanced Original Notes") issued on August 20, 2015 (the "Original Closing Date"). On the Second Refinancing Date, the Issuer used proceeds from the issuance of the Refinancing Notes to redeem in full the First Refinancing Notes.

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 reinvestment period; reinstatement of the non-call period; extension of the weighted average life test, and changes to certain collateral quality tests.

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.

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: $1,098,252,083

Defaulted par: $4,124,033

Diversity Score: 60

Weighted Average Rating Factor (WARF): 3101

Weighted Average Spread (WAS): 3.20%

Weighted Average Recovery Rate (WARR): 49.0%

Weighted Average Life (WAL): 7.05 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 Refinancing Notes is subject to uncertainty. The performance of the Refinancing 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 Refinancing 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 Refinancing 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 Refinancing 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 3101 to 3566)

Rating Impact in Rating Notches

Class A-1a-R2 Notes: 0

Class A-2-R2 Notes: -2

Class B-R2 Notes: -2

Class C-R2 Notes: -1

Class D-R2 Notes: -1

Class E-R2 Notes: -1

Percentage Change in WARF -- increase of 30% (from 3101 to 4031)

Rating Impact in Rating Notches

Class A-1a-R2 Notes: -1

Class A-2-R2 Notes: -3

Class B-R2 Notes: -3

Class C-R2 Notes: -2

Class D-R2 Notes: -1

Class E-R2 Notes: -3

Further details regarding Moody's analysis of this transaction may be found in the related pre-sale report, available 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_1131298.

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.

David Ham
VP - Senior Credit Officer
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

Leon Mogunov
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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