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Hayfin Emerald CLO XI DAC European Cash Flow CLO Notes Assigned Ratings


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Hayfin Emerald CLO XI DAC European Cash Flow CLO Notes Assigned Ratings

Ratings List
Class Rating Amount (mil. €) Subordination (%) Interest rate*
A AAA (sf) 242.80 39.30 3M EURIBOR + 2.00%
B-1 AA (sf) 22.80 31.10 3M EURIBOR + 3.65%
B-2 AA (sf) 10.00 31.10 7.00%
C A (sf) 23.60 25.20 3M EURIBOR + 4.11%
D BBB- (sf) 26.80 18.50 3M EURIBOR + 6.26%
E BB- (sf) 16.80 14.30 3M EURIBOR + 8.12%
F B- (sf) 14.00 10.80 3M EURIBOR + 10.00%
Sub. NR 37.30 N/A N/A
*The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. 3M--Three month. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A—-Not applicable.


  • Hayfin Emerald CLO XI is a European cash flow CLO securitization of a revolving pool, comprising euro-denominated senior secured loans and bonds issued mainly by speculative-grade borrowers. Hayfin Emerald Management LLP manages the transaction.
  • We assigned our ratings to the class A, B-1, B-2, C, D, E, and F notes.
  • The ratings reflect our view of the transaction's diversified collateral pool, credit enhancement, and legal structure, among other factors.

LONDON (S&P Global Ratings) Jan. 25, 2023--S&P Global Ratings today assigned its credit ratings to Hayfin Emerald CLO XI DAC's class A, B-1, B-2, C, D, E, and F notes. At closing, the issuer also issued unrated subordinated notes (see list above).

The class F notes is a delayed draw tranche. It is unfunded at closing and has a maximum notional amount of €14.0 million and a maximum spread of three/six-month Euro Interbank Offered Rate (EURIBOR) plus 10%. The class F notes can only be issued once and only during the reinvestment period for the full €14.0 million amount. The issuer used the full proceeds received from the issuance of the class F notes to redeem the subordinated notes. At issuance, the class F notes' spread can be lowered subject to rating agency confirmation.

Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following this, the notes will switch to semiannual payment.

The portfolio's reinvestment period will end on Jan. 25, 2026.

The ratings assigned to the notes reflect our assessment of:

  • The diversified collateral pool, which primarily comprises 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.

Portfolio Benchmarks
S&P Global Ratings weighted-average rating factor 2779.90
Default rate dispersion 530.65
Weighted-average life (years) 4.63
Obligor diversity measure 101.78
Industry diversity measure 20.34
Regional diversity measure 1.16

Transaction Key Metrics
Total par amount (mil. €) 400.0
Defaulted assets (mil. €) 0.0
Number of performing obligors 120
Portfolio weighted-average rating derived from our CDO evaluator B
'CCC' category rated assets (%) 0.0
'AAA' weighted-average recovery (%) 36.06
Covenanted weighted-average spread (%) 3.80
Reference weighted-average coupon (%) 3.25
Rating rationale

Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average rating of 'B'. We consider that the portfolio is well-diversified on the effective date, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we 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).

In our cash flow analysis, we used the €400 million target par amount, the covenanted weighted-average spread of 3.80%, the reference weighted-average coupon of 3.25%, and the rating-specific recovery rates for the rated notes. 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.

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

Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk is limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria (see "Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions," published on Jan. 30, 2019).

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

Our credit and cash flow analysis indicates that the available credit enhancement for the class B-1 to F notes could withstand stresses commensurate with higher ratings than those we have assigned. However, as the CLO is still in its reinvestment phase, during which the transaction's credit risk profile could deteriorate, we have capped our ratings on the notes.

Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our assigned ratings are commensurate with the available credit enhancement for class A, B-1, B-2, C, D, 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 to F notes based on four hypothetical scenarios. The results are shown in the 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 notes.

Environmental, social, and governance (ESG)

We regard the exposure to ESG credit factors in the transaction as being broadly in line with our benchmark for the sector (see "ESG Industry Report Card: Collateralized Loan Obligations," March 31, 2021). Primarily due to the diversity of the assets within CLOs, the exposure to environmental credit factors is viewed as below average, social credit factors are below average, and governance credit factors are average. For this transaction, the documents prohibit assets from being related to certain activities, including, but not limited to, the following: electrical utility under certain conditions; oil and gas producer under certain conditions; one whose revenues are more than 25% derived from production of opioids, banned hazardous chemicals and pesticides or food commodity derivatives industry or soft commodity trading; one whose revenues are more than 20% derived from services to private prisons; one whose revenues are more than 15% derived from oil exploration; storage facilities or storage services for oil, pipelines, or infrastructure for the use in the oil life cycle; equipment or infrastructure intended for use in oil extraction; one whose revenues are more than 10% derived from manufacturing of civilian firearms or palm oil; one whose revenues are more than 5% derived from pornographic or prostitution, tobacco and tobacco-related products, gambling, unconventional extraction of oil and gas, or thermal coal production; United Nations Global Compact Ten Principles violations; payday lending; endangered wildlife; weapons of mass destruction or controversial weapons; fossil fuels; and illegal drugs. Accordingly, since the exclusion of assets from these industries does not result in material differences between the transaction and our ESG benchmark for the sector, no specific adjustments have been made in our rating analysis to account for any ESG-related risks or opportunities.

Environmental, social, and governance (ESG) corporate credit indicators

The influence of ESG factors in our credit rating analysis of European CLOs primarily depends on the influence of ESG factors in our analysis of the underlying corporate obligors. To provide additional disclosure and transparency of the influence of ESG factors for the CLO asset portfolio in aggregate, we've calculated the weighted-average and distributions of our ESG credit indicators for the underlying obligors (see "The Influence Of Corporate ESG Factors In Our Credit Rating Analysis Of European CLOs," published on April 20, 2022). We regard this transaction's exposure as being broadly in line with our benchmark for the sector, with the environmental and social credit indicators concentrated primarily in category 2 (neutral) and the governance credit indicators concentrated in category 3 (moderately negative) (see "ESG Credit Indicator Report Card: Global CLOs," published on Nov. 24, 2022).

Corporate ESG Credit Indicators
Environmental Social Governance
Weighted-average credit indicator* 2.08 2.13 2.84
E-1/S-1/G-1 distribution (%) 0.75 0.25 0.00
E-2/S-2/G-2 distribution (%) 80.50 79.75 20.75
E-3/S-3/G-3 distribution (%) 8.25 7.00 65.00
E-4/S-4/G-4 distribution (%) 0.00 2.50 1.25
E-5/S-5/G-5 distribution (%) 0.00 0.00 2.50
Unmatched obligor (%) 10.50 10.50 10.50
Unidentified asset (%) 0.00 0.00 0.00
*Only includes matched obligor

Related Criteria

Related Research

Primary Credit Analyst:Shane Ryan, London + 44 20 7176 3461;
Secondary Contacts:Sandeep Chana, London + 44 20 7176 3923;
Hanshu Shao, London + 44 20 7176 0834;
Emanuele Tamburrano, London + 44 20 7176 3825;

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