DBRS Places 31 Classes from 11 US CLO and CDO transactions Under Review with Developing Implications

DBRS, Inc. (“DBRS”) has today placed Under Review with Developing Implications 11 transactions and 31 ratings for collateralized loan obligation (“CLO”) and collateralized debt obligation (“CDO”) transactions backed primarily by portfolios of corporate credit.

The rating actions reflect material updates to the methodologies DBRS uses to rate and monitor CLOs backed by corporate credit (see “Rating CLOs and CDOs of Large Corporate Credit” and “Cash Flow Assumptions for Corporate Credit Securitizations,” both published January 21, 2014).

This methodology supersedes the current Rating Methodology for CLOs and CDOs of Large Corporate Credit, published February 7, 2012.

Key changes to the methodology include:
• updates to the Stressed Default Rate calculations, including a new DBRS CLO Asset Model that replaces the DBRS Large Pool Model;
• increased recovery rates for senior secured loans, reflecting an increased expectation for recovery, particularly at the A (sf) through BB (sf) stress levels;
• decreased recovery rates for senior unsecured bonds;
• new stress for covenant-lite loans at the AAA (sf) and AA (sf) stress levels; and,
• removal of regional correlation factors.

The complete list of public ratings affected by today’s rating action can be found at the end of this Press Release. DBRS re-rates all credit ratings that have been assigned based on the methodology changes and discloses all resulting ratings and rating actions changes.

The ratings listed are under review. Generally, the conditions that lead to the assignment of reviews are resolved within a 90 day period. As this review pertains to a methodological change, a resolution of today’s Under Review with Developing Implications placements should be completed within a six month period. The purpose of these rating actions was solely based upon the updated to the current methodology. DBRS reviews and ratings are under regular surveillance.
These credit ratings have been issued outside the European Union (EU) and may be used for regulatory purposes by financial institutions in the EU.

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

Information regarding DBRS ratings, including definitions, policies and methodologies is available on www.dbrs.com.