News Column

Fitch Rates CIFC Funding 2014-IV, Ltd./LLC

September 3, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings to CIFC Funding 2014-IV, Ltd./LLC (CIFC Funding 2014-IV):

--$4,000,000 class X senior secured floating rate notes, 'AAAsf', Outlook Stable;

--$353,000,000 class A-1 senior secured floating rate notes, 'AAAsf', Outlook Stable;

--$25,000,000 class A-2 senior secured fixed rate notes, assign 'AAAsf', Outlook Stable.

Fitch does not rate the class B-1, B-2, C-1, C-2, D, E, F or subordinated notes.

TRANSACTION SUMMARY

CIFC Funding 2014-IV, Ltd. and CIFC Funding 2014-IV, LLC (together, CIFC Funding 2014-IV, or the issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by CIFC Asset Management LLC (CIFC). Net proceeds from the issuance of secured and subordinated notes will be used to purchase a portfolio of approximately $600 million of primarily senior secured leveraged loans. The CLO will have a four-year reinvestment period and a two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 37.0% for 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 degree of CE available to class A notes is slightly below the average CE of recent CLO issuances. Class X notes are expected to be paid in full from the application of interest proceeds via the interest waterfall.

'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 class A notes are unlikely to be affected by the foreseeable level of defaults. Class X and class A notes are projected to be able to withstand default rates of up to 67.9% and 64.1%, respectively.

Strong Recovery Expectations: The indicative portfolio consists of 97.8% first lien senior secured loans. Approximately 93.2% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, resulting in a base case recovery assumption of 76.3%. In determination of the class X and A note ratings, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions. The analysis of CIFC 2014-IV class X and class A notes assumed a 35.7% recovery rate in Fitch's 'AAAsf' scenario.

RATING SENSITIVITIES

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 and 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 both the class X and class A notes.

The ratings are based on information provided to Fitch by the arranger, Morgan Stanley & Co., LLC as of September 03, 2014. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Global Rating Criteria for Corporate CDOs' (July 25, 2014);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 23, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014).

Applicable Criteria and Related Research:

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725537

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=863774

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Barbara M. Burdzy, +1 212-908-0813

Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Derek Miller, +1 312-368-2076

Senior Director

or

Committee Chairperson

Alina Pak, +1 312-368-3184

Senior Director

or

Media Relations:

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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