Ratings Assigned To Halcyon Loan Advisors European Funding 2017-1#s Class A To F CLO Notes

Stocks and Financial Services Press Releases Friday July 14, 2017 16:48
LONDON--14 Jul--S&P Global Ratings

LONDON (S&P Global Ratings) July 14, 2017--S&P Global Ratings today assigned credit ratings to Halcyon Loan Advisors European Funding 2017-1 DAC's (Halcyon 2017-1) class A, B-1, B-2, C, D, E, and F notes. At closing, Halcyon 2017-1 also issued an unrated subordinated class of notes (see list below).

The ratings assigned to Halcyon 2017-1's notes reflect our assessment of:

The diversified collateral pool, which consists primarily of broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests. The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization.

The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. The transaction's legal structure, which is bankruptcy remote.

Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following this, the notes would permanently switch to semiannual payment. The portfolio's reinvestment period will end approximately four years after closing. Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average 'B' rating. We consider that the portfolio at closing 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 (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 €325 million target par amount, the covenanted weighted-average spread (3.70%), the covenanted weighted-average coupon (4.75%) (where applicable), and the target minimum weighted-average recovery rates at each rating level as indicated by the manager.

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. Elavon Financial Services DAC is the bank account provider and custodian.

At closing, 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 structured finance 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 'A-' is limited to 10% of the aggregate collateral balance.

We consider that the issuer is bankruptcy remote, in accordance with our legal criteria (see "Structured Finance: Asset Isolation And Special-Purpose Entity Methodology," published on March 29, 2017).
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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