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20 May 2011
London, 20 May 2011 -- Moody's Investors Service announced today that it has upgraded the ratings
of four CLO notes issued by Aquilae CLO I PLC.
Issuer: Aquilae CLO I PLC
....EUR216M Class A Floating Rate Notes,
due 2015, Upgraded to Aa1 (sf); previously on Nov 25,
2009 Downgraded to Aa2 (sf)
....EUR12M Class B Floating Rate Notes,
due 2015, Upgraded to A3 (sf); previously on Nov 25,
2009 Downgraded to Baa2 (sf)
....EUR15M Class C Deferrable Floating Rate
Notes, due 2015, Upgraded to Ba1 (sf); previously on
Nov 25, 2009 Downgraded to Ba2 (sf)
....EUR10.5M Class D Deferrable Floating
Rate Notes, due 2015, Upgraded to B2 (sf); previously
on Nov 25, 2009 Downgraded to B3 (sf)
Aquilae CLO I PLC, issued in March 2007, is a single currency
Collateralised Loan Obligation ("CLO") backed by a portfolio of mostly
high yield European loans. The portfolio is managed by Henderson
Global Investors Ltd. This transaction has passed the reinvestment
period. It is composed of 86.7% senior secured loans
from 22 various industries.
The upgrade rating actions taken on the notes are a result primarily of
the improved credit quality of the underlying portfolio and increased
overcollateralization ('OC') since the last rating action in November
2009. The improvements in OC ratios have been driven by the amortisation
of class A notes, and the general appreciation of loan prices.
As of the latest collateral administrator report dated April 2011,
the class A/B, class C, class D and class E reported overcollateralization
ratios increased to 131.7%, 120.6%,
113.8% and 107.0% respectively, from
121.8%, 114.1%, 109.3%,
and 104.1% respectively in October 2009. The Caa
bucket decreased from 42.2m in October 2009 to 25.5m in
February 2011, representing 15.76% of the Aggregate
Principal Balance. In addition, the reported weighted average
rating factor ("WARF") has changed from 2827 to 2995 during the same period.
This change in reported WARF understates the actual credit quality improvement
because of the technical transition related to rating factors of European
corporate credit estimates, as announced in the press release published
by Moody's on 1 September 2010.
In its base case, Moody's analyzed the underlying collateral pool
with WARF of 3974 (versus modelled WARF of 4260 at last rating action).
The base case diversity score, weighted average spread and weighted-average
recovery rate were respectively 30, 3.02% and 60.85%.
This deal comprises of 12.4% Long Dated Obligations which
will need to be liquidated by the legal maturity of the deal in June 2015.
Given the significant size of this bucket, and considering that
about half of this relates to assets with a credit quality below B3,
Moody's applied stressed liquidation price of 65.7%
to the long dated bucket, which equals the latest weighted average
market price reported by trustee. This deviates from our standard
assumptions, which would correspond to a liquidation price assumption
of 83.1%. Should this standard assumption have been
applied, the model outputs would have been a notch better for all
the rated classes.
Moody's also ran sensitivity analysis on key parameters for the rated
notes. For instance, if the modelled WARF was increased by
15% or the performing par was decreased by 5%, the
model outputs of all classes would be not affected by more than a notch.
Moody's notes that this transaction is subject to a high level of macroeconomic
uncertainty, as evidenced by 1) uncertainties of credit conditions
in the general economy and 2) the large concentration of speculative-grade
debt maturing between 2012 and 2014 which may create challenges for issuers
to refinance, and 3) the evolution of market prices for Long Dated
Obligations, which constitute a signicant portion of the portfolio
to be liquidated by the legal maturity of the transaction. CDO
notes' performance may also be impacted by 1) the manager's investment
strategy and behaviour, 2) the transaction delevering pace and 3)
divergence in legal interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Moody's also notes that 61% of the collateral pool consists of
debt obligations whose credit quality has been assessed through Moody's
The principal methodology used in this rating was Moody's Approach to
Rating Collateralized Loan Obligations published in August 2009.
Under this methodology, Moody's used its Binomial Expansion Technique,
whereby the pool is represented by independent identical assets,
the number of which is being determined by the diversity score of the
portfolio. The default and recovery properties of the collateral
pool are incorporated in a cash flow model where the default probabilities
are subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability range is derived
from the credit quality of the collateral pool, and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the seniority
and jurisdiction of the assets in the collateral pool.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA Cash-Flow
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
VP - Senior Credit Officer
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
Moody's upgrades the ratings of EUR 188m CLO notes of Aquilae CLO I
One Canada Square
London E14 5FA
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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