Hong Kong, August 21, 2019 -- Moody's Investors Service ("Moody's") has upgraded the ratings on the
Class B and Class C notes issued by Bayfront Infrastructure Capital Pte.
Ltd.
Issuer: Bayfront Infrastructure Capital Pte. Ltd.
U.S.$72,600,000 Class B Senior Secured
Floating Rate Notes due 2038, Upgraded to Aa2 (sf); previously
on Jul 31, 2018 Definitive Rating Assigned Aa3 (sf)
U.S.$19,000,000 Class C Senior Secured
Floating Rate Notes due 2038, Upgraded to Baa2 (sf); previously
on Jul 31, 2018 Definitive Rating Assigned Baa3 (sf)
Bayfront Infrastructure Capital Pte. Ltd. is a project finance
collateralized loans obligation (CLO) cash flow securitization.
At closing, the notes were collateralized by a portfolio of 37 bank-syndicated
senior project finance and infrastructure loans to 30 projects located
in various countries in Asia Pacific and the Middle East. The portfolio
is not actively traded during the transaction period.
RATINGS RATIONALE
Moody's upgrade rating actions are prompted by an increase in the
credit enhancement available to the Class B and Class C Notes and the
stable credit quality of the portfolio of project finance loans since
closing.
After the payment date in July 2019, the note subordination available
for the Class B Notes and Class C Notes has increased to 15.3%
and 10.8% from 14.1% and 10.0%
respectively at closing. The weighted average rating factor (WARF)
of the portfolio, after applying the credit estimate notching adjustments,
is 887, compared to 975 at closing.
Moody's uses a loan-by-loan Monte Carlo simulation framework
in Moody's CDOROM™ to model the portfolio loss distribution for
this CLO.
The key model inputs Moody's uses in its analysis, such as par,
rating factor, and the recovery rate assumptions, are based
on its published methodology and could differ from the trustee's reported
numbers. In its base case, Moody's analyzed the underlying
collateral pool as having a performing par of USD$442.4
million, a WARF, after applying the credit estimate notching
adjustments, of 887 over a weighted average life of 4.9 years,
a weighted average recovery rate upon default of 76%, an
asset correlation of 30% and a weighted average spread of 2.3%.
The default probability derives from the credit quality, the mean
recovery rate assumptions (excluding external credit support), and
the remaining life of the collateral pool. The estimated average
recovery rate on future defaults is based primarily on the seniority of
the assets in the collateral pool and whether there is external credit
support to the defaulted asset. In each case, historical
and market performance and a collateral manager's latitude to trade collateral
are also relevant factors. Moody's incorporates these default and
recovery characteristics of the collateral pool into its cash flow model
analysis.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Approach
to Rating Collateralized Debt Obligations Backed by Project Finance and
Infrastructure Assets" published in July 2019. 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:
This transaction is subject to the performance of the underlying portfolio
and the credit quality of the external credit support providers and counterparties
of the participation agreements, which in turn is subject to a high
level of macroeconomic uncertainty. CLO notes' performance may
also be impacted either positively or negatively by 1) the manager's investment
strategy and behavior and 2) divergence in the legal interpretation of
CDO documentation by different transactional parties because of embedded
ambiguities.
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.
Moody's either did not receive or take into account one or more
third-party due diligence assessment(s) regarding the underlying
assets or financial instruments (the "Due Diligence Assessment(s)")
in this credit rating action.
The Due Diligence Assessment(s) referenced herein were prepared and produced
solely by parties other than Moody's. While Moody's
uses Due Diligence Assessment(s) only to the extent that Moody's
believes them to be reliable for purposes of the intended use, Moody's
does not independently audit or verify the information or procedures used
by third-party due-diligence providers in the preparation
of the Due Diligence Assessment(s) and makes no representation or warranty,
express or implied, as to the accuracy, timeliness,
completeness, merchantability or fitness for any particular purpose
of the Due Diligence Assessment(s).
In rating this transaction, Moody's CDOROM™ is used to model
the expected loss for each tranche. Moody's CDOROM™
is a Monte Carlo simulation tool which takes each underlying asset default
probability as input. Each underlying asset default behavior is
then modeled individually with a standard multi-factor model incorporating
both intra- and inter-industry correlation. The correlation
structure is based on a Gaussian copula. Each Monte Carlo scenario
simulates defaults and if applicable, recovery rates, to derive
losses on a portfolio. For a synthetic transaction, the model
then allocates losses to the tranches in reverse order of priority to
derive the loss on the tranches. By repeating this process and
averaging over the number of simulations, Moody's can derive
the expected loss on the tranches. For a cash transaction,
the portfolio loss, or default, distribution produced by Moody's
CDOROM™ may be input into a separate cash flow model in accordance
with its priority of payment to determine each tranche's expected
loss.
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.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. Unless
noted in the Regulatory Disclosures as a Non-Participating Entity,
the rated entity is participating and the rated entity or its agent(s)
generally provides Moody's with information for the purposes of
its ratings process. Please refer to www.moodys.com
for the Regulatory Disclosures for each credit rating action under the
ratings tab on the issuer/entity page and for details of Moody's
Policy for Designating Non-Participating Rated Entities.
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.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Kan Leung, CFA
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Marie Lam
Associate Managing Director
Structured Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
