Fitch does not rate the class B, C, D, E, F or subordinated notes.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 38.3% for the class A-1 and A-2 notes (collectively, the 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 the class A notes is higher than the average for recent CLO issuances.
'B/B-' Asset Quality: The average credit quality of the indicative portfolio is 'B/B-', which is consistent with that of 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 display robust projected performance against default rates of up to 100% and 62.2%, respectively.
Strong Recovery Expectations: The indicative portfolio consists of 95.6% first lien senior secured loans, 90.4% 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.
In addition to Fitch's stated criteria, the agency analyzed 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. The class X notes are expected to remain 'AAAsf' and the class A notes are expected to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'A-sf' and 'AAAsf' for the class A notes.
The sources of information used to assess these ratings were the transaction documents provided by the arranger, Morgan Stanley & Co. LLC, and the public domain.
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
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' (
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds
Counterparty Criteria for Structured Finance and Covered Bonds
Global Structured Finance Rating Criteria
Global Rating Criteria for Corporate CDOs
Source: Fitch Ratings
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