Approximately $3.3 million of notes affected
New York, November 11, 2020 -- Moody's Investors Service has upgraded the rating on the following notes
issued by Eastland CLO, Ltd. (the "Issuer"):
U.S. $48,000,000 Class D Floating Rate
Senior Secured Deferrable Interest Extendable Notes Due 2022 (current
outstanding balance of $3,251,287.27),
Upgraded to Baa1 (sf); previously on August 11, 2017 Affirmed
B1 (sf)
Eastland CLO, Ltd., issued in March 2007, is
a managed cashflow CLO. The notes are collateralized primarily
by a portfolio of senior secured loans, with significant exposure
to middle market loans, CLO securities, illiquid loans and
legacy defaulted assets. The transaction's reinvestment period
ended in May 2014.
RATINGS RATIONALE
This rating action is primarily a result of deleveraging observed on the
Class D Notes to-date, and increased confidence that the
notes will be sufficiently collateralized with cash and paid in full in
the near future. In particular, the Class D Notes were paid
down by approximately 74.5% or $9.5 million
on the November 2020 payment date. In addition, collections
from recent payments and refinancing of underlying assets increases the
likelihood that the Issuer will receive sufficient cash proceeds to pay
all outstanding amounts due on the notes. However, this confidence
is tempered by potential uncertainty with timing and settlement.
Given that the the collateral pool has amortized significantly and is
now comprised by only a few remaining assets, Moody's did not use
a cash flow model to analyze the default and recovery properties of the
collateral pool.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of corporate assets from
the current weak US economic activity and a gradual recovery for the coming
months. Although an economic recovery is underway, it is
tenuous and its continuation will be closely tied to containment of the
virus. As a result, the degree of uncertainty around our
forecasts is unusually high.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Factors that would Lead to an Upgrade or Downgrade of the Rating:
The performance of the rated notes is generally subject to uncertainty
in the performance of the related CLO's underlying portfolio.
Repayment of the notes at their maturity may be highly dependent on the
Issuer's successful monetization of illiquid assets and any assets that
mature after the CLO's legal maturity date. This risk in turn may
be contingent upon the Issuer's ability and willingness to sell these
assets. Uncertainty in CLO portfolio performance depends on economic
and credit conditions that may change, including as a function of
the length and severity of the economic and credit shock precipitated
by the global coronavirus pandemic. The CLO manager's investment
decisions and management of the transaction will also affect the performance
of the rated securities.
The principal methodology used in this rating was "Moody's Global Approach
to Rating Collateralized Loan Obligations" published in August 2020
and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1235535.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Please note that a Request for Comment was published in which Moody's
requested market feedback on potential revisions to one or more of the
methodologies used in determining these Credit Ratings. If the
revised methodologies are implemented as proposed, it is not currently
expected that the Credit Ratings referenced in this press release will
be affected. Request for Comments can be found on the rating methodologies
page on www.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 in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Moody's did not use any models, or loss or cash flow analysis,
in its analysis.
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.
This rating is 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_1133569.
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.
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.
Ding Li
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
Ramon O. Torres
Senior Vice President/Manager
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
