DBRS Finalizes the Provisional Ratings on the Senior Funding Facility and the Mezzanine Funding Facility of Annisa CLO, Ltd.

DBRS, Inc. (DBRS) has today finalized the following provisional ratings on the Senior Funding Facility and the Mezzanine Funding Facility (together, the Facilities) of Annisa CLO, Ltd.:

-- Senior Funding Facility due May 2025 rated A (sf)
-- Mezzanine Funding Facility due May 2025 rated BBB (low) (sf)

The rating on the Senior Funding Facility addresses the timely payment of the Senior Base Interest Amount and the ultimate payment of the Senior Funding Amounts and the Senior Commitment Fees on or before the Scheduled Maturity Date in May 2025. The rating on the Mezzanine Funding Facility addresses the ultimate payment of the Mezzanine Base Interest Amount and the ultimate payment of the Mezzanine Funding Amounts and the Mezzanine Commitment Fees on or before the Scheduled Maturity Date in May 2025. For the avoidance of doubt, these ratings do not address the Senior Additional Interest Amount or the Mezzanine Additional Interest Amount.

The ratings of the Facilities are being finalized pursuant to the Warehouse Agreement dated as of May 10, 2016, by and among Annisa CLO, Ltd. as Borrower; Barclays Bank PLC, New York Branch (Barclays) as Facility Agent; Invesco Senior Secured Management, Inc. (Invesco) as Collateral Manager; and The Bank of New York Mellon, N.A. as Collateral Administrator.

The Borrower is a limited liability company incorporated under the laws of the Cayman Islands. This transaction is set up as a cash flow securitization that will be collateralized by a portfolio of leveraged loans subject to Collateral Quality and Portfolio Profile Tests.

As of the finalized ratings date, the transaction portfolio consists of approximately $30.2 million of senior secured term loans to 30 unique obligors, and the Borrower will continue to draw on the Facilities based on a predetermined schedule. The Borrower will continue to draw on the Facilities based on a predetermined schedule. Upon each drawing request, the Collateral Manager will comply with certain portfolio tests. The warehouse will have a six-month reinvestment period followed by an amortization period. The warehouse will reach its maturity date at the earliest of the CLO Closing Date, the business day following the Amortization Period End Date, an Early Maturity Date, or May 2025. An Early Maturity Date can be caused by an Optional Early Maturity Date (no earlier than 12 months after the reinvestment period end date) following an Event of Default (EOD), or at the sole option of the Instructing Lender (Barclays) following an EOD.

Under the Warehouse Agreement, upon an occurrence of an EOD, the Instructing Lender may, in its sole option, elect to designate an Early Maturity Date and liquidate the portfolio, which could adversely affect the Mezzanine Lenders and potentially affect ratings volatility on the Mezzanine Funding Facility.

As the trades settle in the warehouse portfolio, under the drawing schedule, Barclays (Senior and Mezzanine Lender) will continue to fund the Facilities upon the Borrower’s request. In its analysis, DBRS has considered Barclays’ ability to fund the Facilities and will continue to monitor the transaction as part of its ongoing surveillance. Barclays Bank Plc currently has a long-term debt rating of A (high) with a Stable trend by DBRS.

The finalized ratings reflect the following primary considerations:

(1) The Warehouse Agreement dated as of May 10, 2016.

(2) The integrity of the transaction structure.

(3) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.

(4) DBRS’s assessment of the origination, servicing and collateralized loan obligation management capabilities of Invesco Senior Secured Management.

To assess portfolio credit quality, DBRS will provide a credit estimate or internal assessment for each non-financial corporate obligor in the portfolio (not rated by DBRS). Credit estimates are not ratings; rather, they represent a model-driven default probability for each obligor that is used in assigning a rating to the transaction.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating CLOs and CDOs of Large Corporate Credit, which can be found on our website under Methodologies.

This rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.