Madison Park XIII is an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 37.5% for class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE for class A notes is in line with the average for recent CLO issuances. Class X notes are expected to be paid in full from the interest waterfall within 1.5 years of close.
'B/B-' Asset Quality: The average credit quality of the indicative portfolio is 'B/B-', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch Ratings' opinion, the class X and A notes are unlikely to be affected by the foreseeable level of defaults. The class X and A notes are robust against default rates of up to 100% and 61.1%, respectively.
Strong Recovery Expectations: The indicative portfolio consists of 95.5% first-lien senior secured loans, 91.9% of which have strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher. This is in line with the seniority profile of recent vintage CLOs.
Consistent Portfolio Parameters: The portfolio will be actively managed and bound by concentration limitations addressing various loan characteristics. The concentration limitations presented to date are within the range of limits set in the majority of recent CLOs. Fitch addressed the impact of the most prominent risk-presenting concentration allowances.
Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in weighted average spread or recovery rates and increases in default rates or correlation. Fitch expects the class X and A notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios remained at 'AAAsf' for class X notes and ranged between 'A-sf' and 'AAAsf' for class A notes.
The sources of information used to assess these ratings were the transaction documents provided by the arranger,
Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available shortly to investors on Fitch's website at 'www.fitchratings.com'.
For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'firstname.lastname@example.org'.
Additional information is available at 'www.fitchratings.com'.
--'Global Structured Finance Rating Criteria' (
--'Global Rating Criteria for Corporate CDOs' (
--'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds' (
--'Counterparty Criteria for Structured Finance and Covered Bonds' (
Counterparty Criteria for Structured Finance and Covered Bonds
Criteria for Interest Rate Stresses in Structured Finance Transactions
Global Rating Criteria for Corporate CDOs
Global Structured Finance Rating Criteria
Source: Fitch Ratings
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