NOTE: On January 20, 2021, the press release was corrected as follows: A paragraph explaining Moody’s rating of the Combination Securities was added to the RATINGS RATIONALE section following the description of base-case assumptions used for modeling purposes. Revised Release follows.
New York, January 13, 2021 -- Moody's Investors Service ("Moody's") has upgraded
the rating on the following notes issued by Carlyle Global Market Strategies
CLO 2015-2 (Combination Note), Ltd.:
U.S. $137,850,000 Combination Notes due
2027 (the "Combination Notes", current rated balance of $83,171,609),
Upgraded to Aaa (sf); previously on October 1, 2020 Confirmed
at Aa1 (sf)
The Combination Notes are collateralized by $69,200,000
Class A-2 Notes, $21,200,000 Class B Notes,
$10,000,000 Class C-R Notes and $37,450,000
Subordinated Notes (the "CLO Notes") issued by Carlyle Global Market Strategies
CLO 2015-2, Ltd. (the "CLO Issuer"). The CLO
Issuer is a managed cashflow CLO collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. The transaction's
reinvestment period ended in April 2019.
RATINGS RATIONALE
The upgrade action taken on the Combination Notes is primarily a result
of applying Moody's revised CLO assumptions described in "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020. The primary changes to the modeling assumptions
include the analytical treatment of corporate obligors whose ratings are
on review downgrade or assigned a negative outlook. Specifically,
we now adjust the obligor's Moody's Default Probability Rating
down by one notch if the obligor's rating is on review for possible
downgrade and we make no adjustments if the obligor's rating has
a negative outlook. Based on these updates, Moody's
calculated WARF on the portfolio of the CLO Issuer is now 2975 compared
to the WARF of 3427 as reported on trustee's December 2020 report[1].
The upgrade action is also a result of deleveraging of the Combination
Notes since September 2020. The Combination Notes have been paid
down by $1.9 million or 2.2% since then.
The Combination Notes' rated balance is entirely covered by the Class
A-2 and Class B Notes components issued by the CLO Issuer.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
For modeling purposes, Moody's used the following base-case
assumptions:
Performing par and principal proceeds balance: $453,427,848
Defaulted Securities: $3,586,381
Diversity Score: 74
Weighted Average Rating Factor (WARF): 2975
Weighted Average Life (WAL): 3.96 years
Weighted Average Spread (WAS) (before accounting for LIBOR floors):
3.29%
Weighted Average Recovery Rate (WARR): 48.31%
Par haircut in OC tests and interest diversion test: 1.02%
Moody's rating of the Combination Securities addresses only the ultimate receipt of the Combination Securities Rated Balance by the holders of the Combination Securities. Moody's rating of the Combination Securities does not address any other payments or additional amounts that a holder of the Combination Securities may receive pursuant to the underlying documents.
In consideration of the current high uncertainties around the global economy,
and the ultimate performance of the CLO portfolio, Moody's
conducted a number of additional sensitivity analyses representing a range
of outcomes that could diverge, both to the downside and the upside,
from our base case. Some of the additional scenarios that Moody's
considered in its analysis of the transaction include, among others:
additional near-term defaults of companies facing liquidity pressure;
sensitivity analysis on deteriorating credit quality due to a large exposure
to loans with negative outlook, and a lower recovery rate assumption
on defaulted assets to reflect declining loan recovery rate expectations.
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, and dependent Combination Securities,
secured notes, and repackaged securities, is subject to uncertainty
in the performance of the related CLO's underlying portfolio,
which in turn depends on economic and credit conditions that may change.
In particular, the length and severity of the economic and credit
shock precipitated by the global coronavirus pandemic will have a significant
impact on the performance of the securities. 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 December
2020 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1242167.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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.
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, 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 rating has 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_1243406.
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.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
REFERENCES/CITATIONS
[1] Trustee report 02-Dec-2020
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.
Haoning Ding
Asst Vice President - 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
David Ham
VP - Senior Credit Officer
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
