OCP EURO CLO 2017-2 Designated Activity Company -- Moody's upgrades the ratings on EUR 85.4m CLO notes of OCP EURO CLO 2017-2 Designated Activity Company

Rating Action: Moody's upgrades the ratings on EUR 85.4m CLO notes of OCP EURO CLO 2017-2 Designated Activity CompanyGlobal Credit Research - 25 Aug 2022Moody's also affirms the ratings on EUR 305m of notesLondon, August 25, 2022 -- Moody's Investors Service ("Moody's") has upgraded the ratings on the following notes issued by OCP EURO CLO 2017-2 Designated Activity Company:....EUR 59,200,000 Class B Senior Secured Floating Rate Notes due 2032, Upgraded to Aaa (sf); previously on Jan 21, 2022 Upgraded to Aa1 (sf)....EUR 26,200,000 Class C Senior Secured Deferrable Floating Rate Notes due 2032, Upgraded to Aa3 (sf); previously on Jan 21, 2022 Upgraded to A1 (sf)Moody's has also affirmed the ratings on the following notes:....EUR 245,400,000 Class A Senior Secured Floating Rate Notes due 2032, Affirmed Aaa (sf); previously on Jan 21, 2022 Affirmed Aaa (sf)....EUR 22,300,000 Class D Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed Baa1 (sf); previously on Jan 21, 2022 Upgraded to Baa1 (sf)....EUR 24,100,000 Class E Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed Ba1 (sf); previously on Jan 21, 2022 Upgraded to Ba1 (sf)....EUR 13,200,000 Class F Senior Secured Deferrable Floating Rate Notes due 2032, Affirmed B1 (sf); previously on Jan 21, 2022 Upgraded to B1 (sf)OCP EURO CLO 2017-2 Designated Activity Company issued in December 2017, is a collateralised loan obligation (CLO) backed by a portfolio of mostly high-yield senior secured European loans. The portfolio is managed by Onex Credit Partners, LLC with Onex Credit Partners Europe LLP acting as sub manager (together "Onex"). The transaction's reinvestment period ended in January 2022.RATINGS RATIONALEThe rating upgrades on the Class B and C Notes are primarily a result of the improvement in the credit quality of the underlying collateral pool and the improvement in over-collateralisation ratios since the last rating action in January 2022.The rating affirmations on the Class A, D, E and F Notes reflect the expected losses of the notes continuing to remain consistent with their current ratings after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels.The credit quality has improved as reflected in the improvement in the average credit rating of the portfolio (measured by the weighted average rating factor, or WARF) and a decrease in the proportion of securities from issuers with ratings of Caa1 or lower. According to the trustee report dated July 2022 [1] , the WARF was 2899, compared with 3064 of the December 2021 [2] report. Securities with ratings of Caa1 or lower currently make up approximately 2.1% of the underlying portfolio, versus 4.0% in the last rating action in January 2022.The over-collateralisation ratios of the rated notes have improved since the rating action in January 2022. According to the trustee report dated July 2022, the Class A/B, Class C, Class D, Class E and Class F OC ratios are reported at 138.12%, 127.18%, 119.15%, 111.53% and 107.76% compared to December 2021 levels of 137.79%, 126.87%, 118.86%, 111.27% and 107.51%, respectively.The key model inputs Moody's uses in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers.In its base case, Moody's used the following assumptions:Performing par and principal proceeds balance: EUR 419.88MDiversity Score: 55Weighted Average Rating Factor (WARF): 2810Weighted Average Life (WAL): 3.95 yearsWeighted Average Spread (WAS) (before accounting for Euribor floors): 3.68%Weighted Average Coupon (WAC): 4.62%Weighted Average Recovery Rate (WARR): 44.45%The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analysing.Moody's notes that the August 2022 trustee report was published at the time it was completing its analysis of the July 2022 data. Key portfolio metrics such as WARF, diversity score, weighted average spread and life, and OC ratios exhibit little or no change between these dates.Methodology Underlying the Rating Action:The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in December 2021 and available at https://ratings.moodys.com/api/rmc-documents/74832. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.Counterparty Exposure:Today's rating action took into consideration the notes' exposure to relevant counterparties, such as account bank, using the methodology "Moody's Approach to Assessing Counterparty Risks in Structured Finance" published in June 2022. Moody's concluded the ratings of the notes are not constrained by these risks.Factors that would lead to an upgrade or downgrade of the ratings:The rated notes' performance is subject to uncertainty. The notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The collateral manager's investment decisions and management of the transaction will also affect the notes' performance.Additional uncertainty about performance is due to the following:• Portfolio amortisation: The main source of uncertainty in this transaction is the pace of amortisation of the underlying portfolio, which can vary significantly depending on market conditions and have a significant impact on the notes' ratings. Amortisation could accelerate as a consequence of high loan prepayment levels or collateral sales by the collateral manager or be delayed by an increase in loan amend-and-extend restructurings. Fast amortisation would usually benefit the ratings of the notes beginning with the notes having the highest prepayment priority.• Recovery of defaulted assets: Market value fluctuations in trustee-reported defaulted assets and those Moody's assumes have defaulted can result in volatility in the deal's over-collateralisation levels. Further, the timing of recoveries and the manager's decision whether to work out or sell defaulted assets can also result in additional uncertainty. Moody's analysed defaulted recoveries assuming the lower of the market price or the recovery rate to account for potential volatility in market prices. Recoveries higher than Moody's expectations would have a positive impact on the notes' ratings.In addition to the quantitative factors that Moody's explicitly modelled, qualitative factors are part of the rating committee's considerations. These qualitative factors include the structural protections in the transaction, its recent performance given the market environment, the legal environment, specific documentation features, the collateral manager's track record and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com. REFERENCES/CITATIONS [1] Trustee report 1-Jul-2022 [2] Trustee report 6-Dec-2021 Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. Mildred Chime Associate Lead Analyst Structured Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London, E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Ian Perrin Associate Managing Director Structured Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. 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