| Ratings List | |||||
|---|---|---|---|---|---|
| Class | Amount (mil. €) | To rating | From rating | Credit enhancement (%) | Interest rate |
| A-R | 252.75 | AAA (sf) | AAA (sf) | 41.13 | Three/six-month EURIBOR plus 0.84% |
| B-R | 60.25 | AA+ (sf) | AA (sf) | 27.10 | Three/six-month EURIBOR plus 1.35% |
| C-R | 26.00 | A+ (sf) | A (sf) | 21.05 | Three/six-month EURIBOR plus 1.75% |
| D-R | 23.50 | BBB (sf) | BBB (sf) | 15.57 | Three/six-month EURIBOR plus 3.00% |
| E | 27.00 | BB (sf) | BB (sf) | 9.28 | Three/six-month EURIBOR plus 4.95% |
| F | 15.25 | B- (sf) | B- (sf) | 5.73 | Three/six-month EURIBOR plus 5.98% |
Overview
- We have upgraded the class B-R and C-R notes in Jubilee CLO 2015-XV B.V. following our review of the transaction and affirmed our ratings on all other classes of notes.
- Jubilee CLO 2015-XV is a cash flow CLO transaction that securitizes loans granted to primarily speculative-grade corporate firms. The transaction was refinanced in October 2017 and is managed by Alcentra Ltd.
LONDON (S&P Global Ratings) April 10, 2020--S&P Global Ratings today raised its credit ratings on the class B-R and C-R notes in Jubilee CLO 2015-XV B.V. At the same time, we affirmed our ratings on all other classes of notes.
Today's rating actions follow the application of our global corporate CLO criteria and our credit and cash flow analysis of the transaction based on the February 2020 trustee report.
Our ratings address timely payment of interest and ultimate payment of principal on the class A-R and B-R notes and the ultimate payment of interest and principal on the class C-R, D-R, E, and F notes.
In our rating actions, we considered that:
- The reinvestment period for the transaction ended in July 2019, and we expect the transaction to begin deleveraging.
- The weighted-average life of the portfolio has fallen to 4.47 years from 5.20 when the transaction was refinanced, and as a result, the scenario default rates are lower.
- No class of notes is deferring interest.
- All coverage tests are passing.
- The transaction has lost approximately €10 million of par since the refinancing, leading to lower credit enhancement levels for all tranches. The par loss is mainly driven by defaulted and restructured assets. Since February 2018, the transaction has been below target par.
| Portfolio Benchmarks | ||
|---|---|---|
| Current | Previous review | |
| Expected portfolio default rate (%) | 25.20 | 29.32 |
| Default rate dispersion (%) | 580.10 | 689.68 |
| Weighted-average life (years) | 4.47 | 5.22 |
| Obligor diversity measure | 101.74 | 66.92 |
| Industry diversity measure | 18.50 | 16.36 |
| Regional diversity measure | 1.26 | 1.39 |
| Transaction Key Metrics | ||
|---|---|---|
| Current | Previous review | |
| Total collateral amount (mil. €) | 421.24 | 405.30 |
| Defaulted assets (mil. €) | 0.00 | 0.00 |
| No. of performing obligors | 251.00 | 176.00 |
| 'CCC' assets (%) | 5.60 | 5.00 |
| 'AAA' WARR (%) | 37.58 | 35.49 |
| WAS (%) | 4.03 | 3.65 |
| Fixed-rate assets (%) | 4.33 | 2.22 |
| WARR--Weighted-average recovery rate. WAS--Weighted-average spread. | ||
Our credit and cash flow analysis indicates that the available credit enhancement for the class C-R and D-R notes could withstand stresses commensurate with higher rating levels than those we have assigned. However, due to the transaction's sensitivity to key inputs in our analysis, and lack of rating stability at the higher rating levels, we have limited the upgrade on the class C-R notes to one notch and affirmed our rating on the class D-R notes.
Our credit and cash flow analysis indicates that the available credit enhancement for the class F notes is not sufficient to withstand a 'B-' stress. However, according to our guidance for assigning 'CCC' category ratings, to achieve a rating of 'B-', the securities must have sufficient subordination to withstand a steady-state scenario. Accordingly, we believe that S&P Global Ratings' European and U.S. leveraged loan default rates for speculative-grade issuers offer the most suitable proxy in determining whether such security is able to withstand a steady-state scenario when rating a European or U.S. CLO, respectively. To define the applicable 'B' case default rate, we may consider, among other factors, the average annual default rates of speculative-grade corporates, and we then multiply this by the CLO's weighted-average life.
Further, we may consider additional risk mitigants when reviewing our ratings at 'B-', which may include the following:
- The level of credit enhancement, which for the class F notes is 5.73%.
- The cushion between the value of the class F par value triggers and the level set at the transaction's closing. This stands at 1.92%.
- How the break-even default rates at 'B-' compare against the lowest scenario default rate generated by the CDO Evaluator. This provides a cushion of 3.06%.
- The relative level of portfolio diversity, as measured by S&P's Industry Diversity Measure (IDM). This currently stands at 18.5 as per CDO Evaluator.
Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our ratings are commensurate with the available credit enhancement for the class A-R, B-R, C-R, D-R, E, and F notes.
In addition to our standard analysis, to provide an indication of how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A-R to E notes to five of the 10 hypothetical scenarios we looked at in our recent publication (see "How Credit Distress Due To COVID-19 Could Affect European CLO Ratings," published on April 2, 2020).
The results are as follows:
- Increase in 'CCC' category asset exposure to 15% and 25%: there was no rating migration on any of the tranches in the 15% 'CCC' scenario, and the class E notes would be downgraded by one notch in the 25% 'CCC' scenario.
- 10% portfolio default, assuming a weighted-average recovery rate at the 'AAA' rating level: the class B and D notes would be downgraded by one notch and the class E notes by five notches.
- All the underlying issuers in the portfolio had their ratings lowered by one notch: the class A and D notes would be downgraded by one notch, the class B and C notes by two notches, and the class E notes by three notches.
- 10% decline in the weighted average recovery rate assumptions: the class E notes would be downgraded by two notches.
We intend this scenario analysis to be broadly representative of how our ratings may move in a variety of downturn scenarios. However, the estimation approach we have used includes some simplifying assumptions and limitations.
As our rating analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F notes (see "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published on Oct. 1, 2012).
S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak about midyear, and we are using this assumption in assessing the economic and credit implications. We believe the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.
Related Criteria
- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct. 18, 2019
- Criteria | Structured Finance | CDOs: Global Methodology And Assumptions For CLOs And Corporate CDOs, June 21, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- General Criteria: Methodology Applied To Bank Branch-Supported Transactions, Oct. 14, 2013
- Criteria | Structured Finance | General: Global Derivative Agreement Criteria, June 24, 2013
- General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- General Criteria: Methodology: Credit Stability Criteria, May 3, 2010
Related Research
- COVID-19: Coronavirus-Related Public Rating Actions On Nonfinancial Corporations And Affected European CLOs, April 9, 2020
- How Credit Distress Due To COVID-19 Could Affect European CLO Ratings, April 2, 2020
- European CLOs: Assessing The Credit Effects Of COVID-19, March 25, 2020
- European CLO Performance Index Report Q4 2019, March 24, 2020
- Ratings Assigned To European Cash Flow CLO Transaction Jubilee CLO 2015-XV After Refinancing, Oct. 12, 2017
- 2017 EMEA Structured Credit Scenario And Sensitivity Analysis, July 6, 2017
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
| Primary Credit Analyst: | Jekaterina Muhametova, London + 44 20 7176 6764; jekaterina.muhametova@spglobal.com |
| Secondary Contacts: | John Finn, Paris; john.finn@spglobal.com |
| Emanuele Tamburrano, London (44) 20-7176-3825; emanuele.tamburrano@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.