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I AGREE
31 Mar 2011
Approximately EUR 319.9M and GBP 14M current outstanding debt securities affected
London, 31 March 2011 -- Moody's Investors Service announced today that it has upgraded the rating
of Class A notes issued by ICG European Fund 2006 S.A. The
notes affected by today's rating action are as follows:
Issuer: ICG European Fund 2006 S.A.
....Euro 900,000,000 Class A Secured
Floating Rate Multi-Currency Variable Funding Notes due 2024,
Upgraded to Aa3 (sf); previously on Oct 19, 2009 Downgraded
to A1 (sf)
RATINGS RATIONALE
ICG European Fund 2006, issued in November 2006 and managed by Intermediate
Capital Managers Limited, is a multicurrency collateralised loan
obligation backed by a portfolio of European and US mezzanine assets,
a number of which pay some, or all, of their interest as Payment
in Kind (PIK). The current pool (excluding defaulted loans) is
comprised of approximately EUR 568 million, GBP 79 million,
USD 43 million and SEK 184 million of assets. The transaction has
approximately half a year remaining until the end of the reinvestment
period. However, since 2009, the transaction has been
essentially static and deleveraging as a Diversion Event (rating downgrades
below the initial ratings), which causes a Mandatory Redemption,
has occurred.
According to Moody's, the upgrade rating action taken on the notes
is primarily a result of the increased overcollateralization cushions
due to deleveraging of the portfolio. Since the last rating action
in October 2009, Class A notes were partially redeemed by EUR 79
million and GBP 70 million due to the transaction being in Mandatory Redemption
phase. As of the latest investor report dated 28 February 2011,
the Class A overcollateralization ratio is reported at 220.77%,
increased from August 2009 level of 171.97%. In addition,
the weighted average rating factor ("WARF") has decreased from 2964 in
August 2009 to 2645 in February 2011.
Currently, there are 6 underlying obligations which have defaulted,
for which Moody's assumed the recoveries to be zero. In addition,
the deal is exposed to a large number of securities whose default probabilities
are assessed through credit estimates. As credit estimates do not
carry credit indicators such as ratings reviews and outlooks, a
stress of a quarter notch-equivalent assumed downgrade was applied
to each of these estimates. Moody's also conducted stress tests
to assess the collateral pool's concentration risk in obligors bearing
a credit estimate that constitute more than 3% of the collateral
pool.
In the base case, up to 30% of the underlying collateral
pool which is accessed with credit estimates and concentration higher
than 3% have been notched down by two. Moody's analyzed
the resulting adjusted weighted average rating factor of 4031 with weighted
average mean recovery rate of 20%. Moody's also ran a number
of sensitivity analysis including consideration of the scenario that the
largest obligor (which represents 8.42% of the current pool)
migrating to Ca. This jump to default scenario deteriorated the
model output by approximately one notch compared to the base case.
Moody's also considered the effect of an upside recovery scenario of 33%.
Increasing the assumed recovery improved the model output on the notes
by less than two notches.
Moody's notes that this transaction is subject to a high level of macroeconomic
uncertainty, as evidenced by 1) uncertainties of credit conditions
in the general economy and 2) the large concentration of speculative-grade
debt maturing between 2012 and 2014 which may create challenges for issuers
to refinance. CDO notes' performance may also be impacted by 1)
the manager's investment strategy and behavior, 2) the transaction
delevering pace and 3) divergence in legal interpretation of CDO documentation
by different transactional parties due to embedded ambiguities.
The principal methodologies used in this rating is "Moody's Approach
to Rating Collateralized Loan Obligations" published in August 2009.
Under this methodology, Moody's relies on a simulation based framework,
implemented via CDOROMTM, to generate default and recovery scenarios
for each asset in the portfolio, and computes the associated loss
to each class of notes in the structure via Moody's EMEA Cash-Flow
model.
Due to the impact of revised and updated key assumptions referenced in
"Moody's Approach to Rating Collateralized Loan Obligations" and "Annual
Sector Review (2009): Global CLOs", key model inputs used
by Moody's in its analysis, such as par amount, weighted average
rating factor, diversity score, and weighted average recovery
rate, may be different from the trustee's reported numbers.
In addition to the quantitative factors that are explicitly modelled,
qualitative factors are part of the rating committee considerations.
These qualitative factors include the structural protections in each transaction,
the recent deal performance in the current market environment, the
legal environment, specific documentation features, the collateral
manager's track record, and the potential for selection bias in
the portfolio. All information available to rating committees,
including macroeconomic forecasts, input from other Moody's analytical
groups, market factors, and judgments regarding the nature
and severity of credit stress on the transactions, may influence
the final rating decision.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past 6 months.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information source used to prepare the credit rating is the following:
parties involved in the ratings.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
London
Angela Jung
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paris
Florence Tadjeddine
VP - Senior Credit Officer
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades CLO Notes of ICG European Fund 2006 S.A.
No Related Data.
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