articles Ratings /ratings/en/research/articles/210409-newhaven-clo-dac-european-reset-clo-notes-assigned-ratings-11878059 content esgSubNav
Log in to other products


Looking for more?

In This List

Newhaven CLO, DAC European Reset CLO Notes Assigned Ratings


Property In Transition: Zooming In On The Global Office Reboot


CLO Spotlight: CDO Monitor Benchmarks Report For U.S. CLOs: First-Quarter 2021


Mercurio Mortgage Finance's Series 2003-2 Rating Raised On One Class Following Criteria Revision; Three Affirmed


SF Credit Brief: SF New Issuance Was $59 Billion In April 2021, $216 Billion YTD, And Up 51% Year Over Year

Newhaven CLO, DAC European Reset CLO Notes Assigned Ratings

Ratings Assigned
Class Rating Balance (mil. €) Subordination (%) Interest rate
X AAA (sf) 3.00 N/A Three/six-month EURIBOR plus


A AAA (sf) 217.00 38.00 Three/six-month EURIBOR plus


B AA (sf) 29.05 29.70 Three/six-month EURIBOR plus


C A (sf) 21.70 23.50 Three/six-month EURIBOR plus


D BBB- (sf) 26.25 16.00 Three/six-month EURIBOR plus


E BB- (sf) 21.00 10.00 Three/six-month EURIBOR plus


F B- (sf) 9.625 7.25 Three/six-month EURIBOR plus


Sub notes NR 50.00 N/A N/A
NR--Not rated. N/A--Not applicable. EURIBOR--Euro Interbank Offered Rate.


  • We have assigned ratings to Newhaven CLO's class X to F notes.
  • Newhaven CLO is a European cash flow CLO transaction, securitizing a portfolio of primarily senior secured leveraged loans and bonds.

LONDON (S&P Global Ratings) April 9, 2021--S&P Global Ratings today assigned its credit ratings to Newhaven CLO, DAC's class X, A, B, C, D, E, and F notes. At closing, the issuer also issued unrated subordinated notes (see list above).

Newhaven CLO is a European cash flow CLO transaction, securitizing a portfolio of primarily senior secured leveraged loans and bonds. The transaction is managed by Bain Capital Credit Ltd.

The ratings assigned to Newhaven CLO DAC's notes reflect our assessment of:

  • The diversified collateral pool, which consists primarily of broadly syndicated speculative-grade senior secured term loans and bonds that are governed by collateral quality tests.
  • The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization.
  • The collateral manager's experienced team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading.
  • The transaction's legal structure, which is bankruptcy remote.
  • The transaction's counterparty risks, which is in line with our counterparty rating framework.

A notable feature in this transaction is the introduction of loss mitigation obligations. Loss mitigation obligations allow the issuer to participate in potential new financing initiatives by a borrower in default or in distress. This feature aims to mitigate the risk of other market participants taking advantage of CLO restrictions, which typically do not allow the CLO to participate in a defaulted entity new financing request, and hence increase the chance of increased recovery for the CLO. While the objective is positive, it may lead to par erosion as additional funds will be placed with an entity that is under distress or in default. This may cause greater volatility in our ratings if these loans' positive effect does not materialize. In our view, the restrictions on the use of proceeds and the presence of a bucket for such loss mitigation loans helps to mitigate the risk.

Loss mitigation obligation mechanics

Under the transaction documents, the issuer can purchase loss mitigation obligations, which are assets of an existing collateral obligation held by the issuer, offered in connection with bankruptcy, workout, or restructuring of the obligation, to improve the recovery value of the related collateral obligation.

The purchase of loss mitigation obligations is not subject to the reinvestment or eligibility criteria. They receive no credit in the principal balance definition--except where loss mitigation obligations meet the eligibility criteria, with certain exclusions, and are purchased using principal proceeds–-in which case they are afforded defaulted treatment in par coverage tests.

To protect the transaction from par erosion, any distributions received from loss mitigation obligations, which are afforded credit in the par coverage tests, will irrevocably form part of the issuer's principal account proceeds. The cumulative exposure to loss mitigation obligations is limited to 10% of target par.

The issuer may purchase loss mitigation obligations using either interest proceeds, principal proceeds, or amounts in the supplemental reserve account. The use of interest proceeds to purchase loss mitigation obligations is subject to all interest coverage tests passing following the purchase, and the manager determining that there are sufficient interest proceeds to pay interest on all the rated notes on the upcoming payment date.

The use of principal proceeds is subject to passing par coverage tests and the manager having built sufficient excess par in the transaction so that the principal collateral amount is equal to or exceeds the portfolio's target par balance after the reinvestment.

To protect the transaction from par erosion, any distributions received from loss mitigation obligations that are either purchased with the use of principal, or purchased with interest or amounts in the supplemental account--and have been afforded credit in the coverage tests--will irrevocably form part of the issuer's principal account proceeds and cannot be recharacterized as interest.

The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow CDOs (see "Global Methodology And Assumptions For CLOs And Corporate CDOs," published on June 21, 2019). As such, we have not applied any additional scenario and sensitivity analysis when assigning preliminary ratings to any classes of notes in this transaction.

In our cash flow analysis, we used the €350 million target par amount, the covenanted weighted-average spread (3.55%), the reference weighted-average coupon (4.25%), and the covenanted weighted-average recovery rates as indicated by the collateral manager. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category. Our credit and cash flow analysis indicates that the available credit enhancement for the class B to E notes could withstand stresses commensurate with higher rating levels than those we have assigned. However, as the CLO is in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our ratings assigned to the notes.

Under our structured finance ratings above the sovereign criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned rating levels (see "Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions," published on Jan. 30, 2019).

Until the end of the reinvestment period on Feb. 15, 2025, the collateral manager may substitute assets in the portfolio for so long as our CDO Monitor test is maintained or improved in relation to the initial ratings on the notes. This test looks at the total amount of losses that the transaction can sustain as established by the initial cash flows for each rating, and compares that with the default potential of the current portfolio plus par losses to date. As a result, until the end of the reinvestment period, the collateral manager can, through trading, deteriorate the transaction's current risk profile, as long as the initial ratings are maintained.

The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate the exposure to counterparty risk under our current counterparty criteria (see "Counterparty Risk Framework: Methodology And Assumptions," published on March 8, 2019).

The transaction's legal structure is bankruptcy remote, in line with our legal criteria (see "Asset Isolation And Special-Purpose Entity Methodology," published on March 29, 2017).

Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our ratings are commensurate with the available credit enhancement for each class of 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 to E notes to five of the 10 hypothetical scenarios we looked at in our publication "How Credit Distress Due To COVID-19 Could Affect European CLO Ratings," published on April 2, 2020 (see chart below).


As our ratings 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-R notes.

S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the world. Widespread immunization, which will help pave the way for a return to more normal levels of social and economic activity, looks to be achievable by most developed economies by the end of the third quarter. However, some emerging markets may only be able to achieve widespread immunization by year-end or later. We use these assumptions about vaccine timing in assessing the economic and credit implications associated with the pandemic (see our research here: As the situation evolves, we will update our assumptions and estimates accordingly.

Newhaven CLO DAC is a broadly syndicated CLO managed Bain Capital Credit Ltd.

Related Criteria

Related Research

Primary Credit Analyst:Sandeep Chana, London + 44 20 7176 3923;
Secondary Contacts:Matteo Breviglieri, London (44) 20-7176-8495;
Emanuele Tamburrano, London + 44 20 7176 3825;

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, (free of charge), and and (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

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:

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back