DBRS Finalizes the Provisional Ratings on the Senior Funding Facility and the Mezzanine Funding Facility of Flatiron CLO 17 Ltd.

DBRS, Inc. (DBRS) has today finalized the provisional ratings on the Senior Funding Facility and the Mezzanine Funding Facility (together, the Facilities) of Flatiron CLO 17 Ltd. as follows:

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

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

The ratings on the Facilities are being assigned pursuant to the Warehouse Agreement, dated November 14, 2016, by Flatiron CLO 17 Ltd. as Borrower; Barclays Bank PLC, New York Branch (Barclays) as Facility Agent; NYL Investors LLC as Collateral Manager; and Deutsche Bank Trust Company Americas as Collateral Administrator, Securities Intermediary and Security Agent.

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, which 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 $89.7 million of senior secured term loans to 45 unique obligors, and 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 reinvestment period end date in May 2017, followed by an amortization period. The warehouse will reach its maturity date at the earliest of the CLO Closing Date, the Scheduled Maturity Date in November 2025 or the date upon which the final payment on the last of the collateral of the portfolio has been received.

An early maturity date can be caused by an Optional Early Maturity Date (no earlier than 12 months after the reinvestment period end date) or at the sole option of the Instructing Lender (Barclays) following an Event of Default. Under the Warehouse Agreement, upon an occurrence of (and during the continuation of) an Event of Default, the Instructing Lender (Barclays) may, in its sole option, elect to designate an Acceleration 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 (as 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 it will continue to monitor the transaction as part of ongoing surveillance. Barclays Bank PLC currently has a public Long-Term Debt rating of A (high) with a Negative trend by DBRS.

The finalized ratings reflect the following primary considerations:

(1) The Warehouse Agreement dated November 14, 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 collateralized loan obligation management capabilities of NYL Investors LLC.

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

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

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

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.

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