Preliminary Rtgs Assigned To 2 Classes From Octagon Investment Partners XIV Ltd. In Connection With Proposed Refinancing

Stocks and Financial Services Press Releases Friday April 21, 2017 09:33
CENTENNIAL--21 Apr--S&P Global Ratings

CENTENNIAL (S&P Global Ratings) April 20, 2017--S&P Global Ratings today assigned its preliminary ratings to the class X-R, A-1a-R, A-1b-R, A-2-R, B-R, C-R, D-R, and E-R replacement notes from Octagon Investment Partners XIV Ltd., a collateralized loan obligation (CLO) originally issued in December 2012 that is managed by Octagon Credit Investors LLC (see list). The replacement notes will be issued via a proposed supplemental indenture. The preliminary ratings reflect our opinion that the credit support available is commensurate with the associated rating levels.

All of the replacement notes, except D-R and E-R, are expected to be issued at a lower spread than the original notes. The preliminary ratings are based on information as of April 20, 2017. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.

On the May 15, 2017, refinancing date, the proceeds from the issuance of the replacement notes are expected to redeem the original notes. At that time, we anticipate withdrawing the ratings on the original notes and assigning ratings to the replacement notes. However, if the refinancing doesn't occur, we may affirm the ratings on the original notes and withdraw our preliminary ratings on the replacement notes.

The replacement notes are being issued via a proposed supplemental indenture, which, in addition to outlining the terms of the replacement notes, will also make the following changes: The stated maturity, reinvestment period and non-call period will be extended by 6.5, five, and four years, respectively.This transaction uses a covenant-lite matrix with a range of 40% and 90% of covenant-lite loans in the portfolio.The manager has an option to use the formula-based Standard & Poor's CDO Monitor.

Updated S&P Global Ratings industry categories and recoveries will be used.Our review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the trustee report, to estimate future performance (see table).

In line with our criteria, our cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, and recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest or ultimate principal, or both, to each of the rated tranches.

The transaction currently holds Kasima LLC (an Structured Finance asset notched from Moody's). As such, a criteria interpretation was utilized.

Our review of the transaction also relied, in part, upon a criteria interpretation with respect to "CDOs: Mapping A Third Party's Internal Credit Scoring System To Standard & Poor's Global Rating Scale," published May 8, 2014, which allows us to use a limited number of public ratings from other Nationally Recognized Statistical Rating Organizations to assess the credit quality of assets not rated by S&P Global Ratings.

The criteria provide specific guidance for the treatment of corporate assets not rated by S&P Global Ratings, as well as outlines the treatment of securitized assets.

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