Ratings Assigned To CVC Cordatus Loan Fund VII#s Class A To F European Cash Flow CLO Notes

Stocks and Financial Services Press Releases Wednesday August 31, 2016 17:35
LONDON--31 Aug--S&P Global Ratings

LONDON (S&P Global Ratings) Aug. 31, 2016--S&P Global Ratings has assigned its credit ratings to CVC Cordatus Loan Fund VII Designated Activity Company's floating- and fixed-rate class A-1, A-2 B-1, B-2, C, D, E, and F notes. At closing, CVC Cordatus Loan Fund VII also issued an unrated subordinated class of notes (see list below).

CVC Cordatus Loan Fund VII is a European cash flow collateralized loan obligation (CLO), securitizing a portfolio of primarily senior secured euro-denominated leveraged loans and bonds issued by European borrowers. CVC Credit Partners Group Ltd. is the collateral manager.

Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following this, the notes permanently switch to semiannual payment. The portfolio's reinvestment period ends approximately four years after closing.

Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average 'B' rating. The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations (CDO; see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs,"published on Aug. 8, 2016).

In our cash flow analysis, we used the €440 million target par amount, a weighed-average spread (4.25%), a weighted-average coupon (5.50%), and weighted-average recovery rates at each rating level. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category.

Bank of New York Mellon, London branch is the bank account provider and custodian. The documented downgrade remedies are in line with our current counterparty criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013).

Following the application of our ratings above the sovereign criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned rating levels (see "Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions," published on Aug. 8, 2016). This is because the concentration of the pool comprising assets in countries rated lower than 'AA-' or with a T&C assessment of lower than 'AAA' is limited to a proportion of the aggregate collateral balance that is below our diversification threshold levels.

The issuer is bankruptcy remote, in accordance with our European legal criteria (see "Europe Asset Isolation And Special-Purpose Entity Criteria--Structured Finance," published on Sept. 13, 2013).
Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our ratings are commensurate with the available credit enhancement for each class of notes.

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