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OCP Euro CLO 2019-3 Designated Activity Company -- Moody's assigns definitive ratings to eight classes of refinancing notes issued by OCP Euro CLO 2019-3 Designated Activity Company

·16 min read

Rating Action: Moody's assigns definitive ratings to eight classes of refinancing notes issued by OCP Euro CLO 2019-3 Designated Activity CompanyGlobal Credit Research - 20 Apr 2021Madrid, April 20, 2021 -- Moody's Investors Service ("Moody's") announced that it has assigned the following definitive ratings to the refinancing notes issued by OCP Euro CLO 2019-3 Designated Activity Company (the "Issuer"):....EUR 2,400,000 Class X Senior Secured Floating Rate Notes due 2033, Assigned Aaa (sf)....EUR 266,000,000 Class A Senior Secured Floating Rate Notes due 2033, Assigned Aaa (sf)....EUR 26,400,000 Class B-1 Senior Secured Floating Rate Notes due 2033, Assigned Aa2 (sf)....EUR 10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2033, Assigned Aa2 (sf)....EUR 25,100,000 Class C Senior Secured Deferrable Floating Rate Notes due 2033, Assigned A2 (sf)....EUR 32,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2033, Assigned Baa3 (sf)....EUR 24,500,000 Class E Senior Secured Deferrable Floating Rate Notes due 2033, Assigned Ba3 (sf)....EUR 11,250,000 Class F Senior Secured Deferrable Floating Rate Notes due 2033, Assigned B3 (sf)RATINGS RATIONALEThe rationale for the ratings is based on a consideration of the risks associated with the CLO's portfolio and structure as described in our methodology.The Issuer issued the refinancing notes in connection with the refinancing of the following classes of notes: Class A Notes, Class B-1 Notes, Class B-2 Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes due 2030 (the "Original Notes"), previously issued on 17 May 2019 (the "Original Closing Date").On the Original Closing Date, the Issuer also issued EUR 37,900,000 of subordinated notes which are not rated, and which will remain outstanding. As part of this full refinancing, the Issuer issued EUR 3,392,000 of additional subordinated notes which are not rated.Interest and principal amortisation amounts due to the Class X Notes are paid pro rata with payments to the Class A Notes. The Class X Notes amortise by EUR 300,000 over eight payment dates starting on the first payment date.As part of this full refinancing, the Issuer has renewed the reinvestment period at four and a quarter years and extended the weighted average life to 8.5 years. It has also amended certain concentration limits, definitions and other features. The issuer has included the ability to hold loss mitigation obligations.In addition, the Issuer has amended the base matrix and modifiers that Moody's has taken into account for the assignment of the definitive ratings.The Issuer is a managed cash flow CLO. At least 90% of the portfolio must consist of secured senior loans or senior secured bonds and up to 10% of the portfolio may consist of unsecured senior loans, second-lien loans, high yield bonds and mezzanine loans. The portfolio is expected to be 99% ramped as of the closing date and to comprise of predominantly corporate loans to obligors domiciled in Western Europe. The remainder of the portfolio will be acquired during the 2 month ramp-up period in compliance with the portfolio guidelines.Onex Credit Partners, LLC will continue to manage the CLO. It will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four and a quarter years reinvestment period. Thereafter, subject to certain restrictions, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations or credit improved obligations.The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority.The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of European corporate assets from a gradual and unbalanced recovery in European economic activity.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.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 2020 and available at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1242167. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.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.Moody's modelled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in December 2020.Moody's used the following base-case modeling assumptions:Target Par: EUR 425,000,000Diversity Score: 44Weighted Average Rating Factor (WARF): 2975Weighted Average Spread (WAS): 3.40%Weighted Average Coupon (WAC): 4.00%Weighted Average Recovery Rate (WARR): 43.5%Weighted Average Life (WAL): 8.5 yearsMoody's has addressed the potential exposure to obligors domiciled in countries with local currency ceiling (LCC) of A1 or below. As per the portfolio constraints and eligibility criteria, exposures to countries with LCC of A1 to A3 cannot exceed 10% and obligors cannot be domiciled in countries with LCC below A3.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 at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1275869.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 ratings tab on the issuer/entity page for the respective issuer on www.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 www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating reviewMoody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.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 ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Gaston Wieder Vice President - Senior Analyst Structured Finance Group Moody's Investors Service Espana, S.A. Calle Principe de Vergara, 131, 6 Planta Madrid 28002 Spain JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Volker Gulde Senior Vice President/Manager Structured Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Espana, S.A. Calle Principe de Vergara, 131, 6 Planta Madrid 28002 Spain JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. 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