Fitch Ratings has affirmed the ratings on Guggenheim Private Debt Fund Note Issuer, LLC (Guggenheim PDFNI) as follows:
--$292,499,994 class A notes, series A-1, at 'Asf'; Outlook Stable;
--$44,999,995 class A notes, series A-2,at 'Asf'; Outlook Stable;
--$90,900,011 class A notes, series A-3, 'Asf', Outlook Stable;
--$48,749,993 class B notes, series B-1, at 'BBBsf'; Outlook Stable;
--$7,499,995 class B notes, series B-2, at 'BBBsf'; Outlook Stable;
--$15,150,012 class B notes, series B-3, 'BBBsf', Outlook Stable;
--$60,124,994 class C notes, series C-1, at 'BBsf'; Outlook Stable;
--$9,249,995 class C notes, series C-2, at 'BBsf'; Outlook Stable;
--$18,685,011 class C notes, series C-3, 'BBsf', Outlook Stable;
--$40,624,994 class D notes, series D-1, at 'Bsf'; Outlook Stable;
--$6,249,996 class D notes, series D-2, at 'Bsf'; Outlook Stable;
--$12,625,010 class D notes, series D-3, 'Bsf', Outlook Stable.
KEY RATING DRIVERS
The performance of the transaction has remained relatively stable since the last review, with the current portfolio WARF unchanged at 'B-', and the current WAS at 9.4% versus a test requirement of 4.25%. Fitch currently considers 21.2% of the portfolio to be rated 'CCC' or lower. Only one issuer representing 1.9% of the portfolio has defaulted to date, and all collateral quality and coverage tests are passing. The underlying portfolio as of the Feb. 13, 2014 trustee report consists of approximately $945.8 million of performing broadly syndicated loans and private debt investments, as well as $70.3 million in cash from principal collections. Since closing, approximately $48.2 million of excess spread has been redirected to the principal collection account for investment in collateral, increasing the degree of collateral coverage for the notes.
Fitch analyzed the current portfolio characteristics as well as a 'Fitch-Stressed' portfolio that accounted for many of the worst-case portfolio concentrations permitted by the indenture (which is further detailed in Fitch's press release 'Fitch Rates Guggenheim Private Debt Fund Note Issuer, LLC' dated March 12, 2013). The cash flow modeling analysis of both portfolios indicated that each class of notes performs in line with their current ratings, and the notes are not expected to experience rating volatility in the near term. Fitch therefore affirmed the ratings on the notes as indicated above and maintained their stable outlooks.
The ratings of the notes may be sensitive to the following: asset defaults, and portfolio migration, including assets being downgraded to 'CCC', portions of the portfolio being placed on Rating Watch Negative, overcollateralization (OC) or interest coverage (IC) test breaches, or breach of concentration limitations or portfolio quality covenants.
Standard sensitivity analysis was conducted on the Fitch-stressed portfolio at close as described in Fitch's corporate CDO criteria, with the transaction's performance in these scenarios deemed to be within the expectations of each respective rating. Fitch also determined that the results of the sensitivity analysis run at close would be sufficient for upsizes of the transaction and therefore did not run additional sensitivities after the third funding date.
Guggenheim PDFNI (the issuer) is a collateralized loan obligation (CLO) transaction that closed in July 2012 and had its first, second, and third funding dates in July 2012, October 2012, and March 2013 respectively. The transaction is managed by Guggenheim Partners Investment Management, LLC and will remain in its reinvestment period until July 2016. An additional $285 million of commitments has been obtained from investors and remains outstanding, bringing total commitments for the transaction to $1.2 billion. Fitch expects these commitments to be drawn on one or two future funding dates.
Fitch has also received a proposed supplemental indenture for the CLO, which would allow the manager up to two additional funding dates after the Feb. 11, 2014 effective date. Fitch determined that the proposed supplemental indenture would not adversely affect Fitch's current ratings of the CLO liabilities.
Initial Key Rating Drivers and Rating Sensitivity are further described in the commentary published on July 12, 2012. A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that asset class is also available by accessing the reports and links indicated below.
Additional information is available at www.fitchratings.com.
Applicable Criteria & Related Research:
--'Fitch Rates Guggenheim Private Debt Fund Note Issuer, LLC' (July 12, 2012);
--'Guggenheim Private Debt Fund Note Issuer, LLC (New Issue Appendix; July 12, 2012);
--'Fitch Assigns Ratings to Guggenheim Private Debt Fund Note Issuer, LLC; Affirms Existing Ratings' (Mar. 12, 2013);
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2013);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 13, 2013);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 23, 2014).
Applicable Criteria and Related Research:
Criteria for Interest Rate Stresses in Structured Finance Transactions
Counterparty Criteria for Structured Finance and Covered Bonds
Global Rating Criteria for Corporate CDOs
Global Structured Finance Rating Criteria
- Security Upgrades & Downgrades
- Investment & Company Information
- Fitch Ratings
Primary Surveillance Analyst:
Felix Chen, +1-212-908-9154
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Derek Miller, +1-312-368-2076
Sandro Scenga, +1-212-908-0278