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Rating Action:

Moody's upgrades ratings of notes issued by Bayfront Infrastructure Capital Pte. Ltd.

21 Aug 2019

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

No Related Data.
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