Kroll Bond Rating Agency Europe Limited (KBRA) assigns preliminary ratings to six classes of notes to be issued by Deer Park CLO DAC, a cash flow collateralised loan obligation (CLO) back primarily by a diversified portfolio of Euro-denominated corporate loans.
Deer Park CLO DAC is managed by Blackstone / GSO Debt Funds Management Europe Limited ("DFME" or the "collateral manager"). The CLO will have a 3.1-year reinvestment period and a 12.6-year legal final. The preliminary ratings reflect initial credit enhancement levels, coverage tests including par value and interest coverage tests, excess spread, and a reinvestment par value test.
The collateral in Deer Park CLO DAC will mainly consist of broadly syndicated leveraged loans issued by corporate obligors diversified across sectors. The obligors in the portfolio have a K-WARF of 2392, which represents a weighted average portfolio assessment of approximately B. The target portfolio par amount is €350.0 million with exposures to 148 obligors.
DFME currently has €8.8 billion in AUM across 22 European CLOs as of April 2020. DFME is a large, programmatic issuer of European CLOs with a strong track record and highly experienced management team. DFME is an affiliate of The Blackstone Group Inc. and GSO Capital Partners LP (together with other affiliates, "GSO") an alternative asset manager with over $120 billion in credit assets under management.
The social and economic fallout from the novel coronavirus (COVID-19) pandemic will impact different corporate sectors to varying degrees but broadly, we expect pressure on corporate credit portfolio quality. KBRA assessed the risks of near-term potential credit deterioration across by increasing the portfolio’s KBRA Weighted Average Rating Factor (K-WARF).
The preliminary ratings on the Class X, A-1, A-2A, and A-2B Notes consider the timely payment of interest and ultimate payment of principal by the applicable stated maturity date, while its preliminary ratings on the Class B and C notes consider the ultimate payment of interest and principal.
KBRA analysed the transaction using Structured Credit Global Rating Methodology published on 13 March 2020 and the and the Global Structured Finance Counterparty Methodology published on 8 August 2018.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the EU Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the EU Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA Europe
KBRA Europe is a full-service credit rating agency (CRA) registered with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency, Inc. (KBRA) is a CRA registered as an NRSRO with the U.S. Securities and Exchange Commission and is a certified CRA with ESMA. KBRA is also recognized by the U.S. National Association of Insurance Commissioners as a Credit Rating Provider and is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.
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