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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

 

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Rating Action:

Moody's upgrades ratings on $40.5 million of notes issued by Callidus Debt Partners CLO Fund VI, Ltd.

31 Mar 2016

Moody's also affirms the ratings on $225.8 million of notes

New York, March 31, 2016 -- Moody's Investors Service has upgraded the ratings on the following notes issued by Callidus Debt Partners CLO Fund VI, Ltd.:

U.S. $23,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2021, Upgraded to Aaa (sf); previously on July 23, 2015 Upgraded to Aa1 (sf)

U.S. $17,500,000 Class B Senior Secured Deferrable Floating Rate Notes Due 2021, Upgraded to A1 (sf); previously on July 23, 2015 Upgraded to A2 (sf)

Moody's also affirmed the ratings on the following notes:

U.S. $25,000,000 Class A-1D Delayed Draw Senior Secured Floating Rate Notes Due 2021 (current outstanding balance of $15,815,938), Affirmed Aaa (sf); previously on July 23, 2015 Affirmed Aaa (sf)

U.S. $279,000,000 Class A-1T Senior Secured Floating Rate Notes Due 2021 (current outstanding balance of $176,505,867), Affirmed Aaa (sf); previously on July 23, 2015 Affirmed Aaa (sf)

U.S. $13,000,000 Class D Senior Secured Deferrable Floating Rate Notes Due 2021, Affirmed Ba3 (sf); previously on July 23, 2015 Affirmed Ba3 (sf)

U.S. $20,500,000 Class C Senior Secured Deferrable Floating Rate Notes Due 2021, Affirmed Baa3 (sf); previously on July 23, 2015 Upgraded to Baa3 (sf)

Callidus Debt Partners CLO Fund VI, Ltd., issued in September 2007, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in October 2014.

RATINGS RATIONALE

These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over-collateralization (OC) ratios since July 2015. The Class A-1D and A-1T notes have been paid down collectively by approximately 28.7% or $77.5 million since then. Based on the trustee's February 2016 report, the OC ratios for the Class A, Class B, Class C, and Class D notes are reported at 131.8%, 121.9%, 112.1%, and 106.6%, respectively, versus July 2015 levels of 123.6%, 116.6%, 109.4%, and 105.3%, respectively.

Methodology Used for the Rating Action

The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Factors that Would Lead to an Upgrade or Downgrade of the Rating:

This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings:

1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers.

2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities.

3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance.

4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority.

5) Higher-than-average exposure to assets with weak liquidity: The presence of assets with the worst Moody's speculative grade liquidity (SGL) rating, or SGL-4, exposes the notes to additional risks if these assets default. The historical default rate is far higher for companies with SGL-4 ratings than those with other SGL ratings. Due to the deal's high exposure to SGL-4 rated assets, which constitute around $8.6 million of par, Moody's ran a sensitivity case defaulting those assets.

In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss):

Moody's Adjusted WARF -- 20% (2175)

Class A-1D: 0

Class A-1T: 0

Class A-2: 0

Class B: +2

Class C: +2

Class D: +1

Moody's Adjusted WARF + 20% (3263)

Class A-1D: 0

Class A-1T: 0

Class A-2: -1

Class B: -1

Class C: -1

Class D: -1

Loss and Cash Flow Analysis:

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."

The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $283.9 million, no defaulted par, a weighted average default probability of 17.98% (implying a WARF of 2719), a weighted average recovery rate upon default of 48.1%, a diversity score of 45 and a weighted average spread of 3.1% (before accounting for LIBOR floors).

Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors.

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 describes its loss and cash flow analysis in the section "Ratings Rationale" of this press release.

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 or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

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.

Wenjie Zhang
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

David Ham
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades ratings on $40.5 million of notes issued by Callidus Debt Partners CLO Fund VI, Ltd.
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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