Preliminary Ratings Assigned To Six Classes From KVK CLO 2013-1 Ltd. In Connection With Proposed Refinancing

Stocks and Financial Services Press Releases Thursday December 7, 2017 08:56
NEW YORK--7 Dec--S&P Global Ratings
OVERVIEW
  • We reviewed KVK CLO 2013-1 Ltd./KVK CLO 2013-1 LLC, which, based on its proposed supplemental indenture, is expected to refinance its class A, B, C, D, and E notes on Dec. 13, 2017, through an optional redemption and replacement note issuance.
  • After analyzing the changes to the transaction, we assigned our preliminary ratings to the replacement class A-R, B-R, C-R, D-R, and E-R notes and new class X notes.
  • The original class A, B, C, D, and E notes are expected to be fully redeemed with the proceeds from the replacement note issuance on the Dec. 13, 2017, refinancing date.

NEW YORK (S&P Global Ratings) Dec. 6, 2017--S&P Global Ratings today assigned its preliminary ratings to the class A-R, B-R, C-R, D-R, and E-R replacement notes and new class X notes from KVK CLO 2013-1 Ltd./KVK CLO 2013-1 LLC, a collateralized loan obligation (CLO) originally issued in 2013 that is managed by Kramer Van Kirk Credit Strategies L.P. (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.
The preliminary ratings are based on information as of Dec. 6, 2017. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.

On the Dec. 13, 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:
  • Issue the class A-R, B-R, C-R, and D-R notes at lower spreads than the original notes.
  • Issue the class E-R notes at a floating spread that is higher than the original notes.
  • Issue new class X notes
  • Extend the reinvestment period by 2.75 years.
  • Partially recapitalize the transaction and decrease the total issuance amount to $495.61 million from $570.00 million.

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.

We will continue to review whether, in our view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and we will take further rating actions as we deem necessary.


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