DBRS Assigns Provisional Ratings to the Senior Funding Facility and the Mezzanine Funding Facility of Milos CLO, Ltd.

DBRS, Inc. (DBRS) has today assigned the following provisional ratings to the Senior Funding Facility and the Mezzanine Funding Facility (together, the Facilities) of Milos CLO, Ltd.:

-- Senior Funding Facility due February 2026 rated A (sf)
-- Mezzanine Funding Facility due February 2026 rated BBB (low) (sf)

The provisional ratings on the Facilities are being assigned pursuant to the Warehouse Agreement dated as of February 10, 2017, between Milos CLO, Ltd. as Borrower; Barclays Bank PLC, New York Branch (Barclays) as Facility Agent; Invesco RR Fund L.P. (Invesco) as Collateral Manager; and U.S. Bank National Association 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 provisional rating date, there exist no collateral loans in the transaction portfolio. Invesco will act as the Collateral Manager of the Borrower.

The Borrower will start 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 August 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 February 2026 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 six months after the reinvestment period end date) or at the sole option of the Instructing Lender (Barclays) following an EOD. 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.

The above ratings on the Facilities are provisional. Finalized ratings will be issued upon receipt of confirmation that the aggregated funding amount of the Facilities has reached $30 million as per the funding matrix stipulated in the Warehouse Agreement. To the extent that the documents and information provided to DBRS by the Borrower, Barclays Bank Plc and the Collateral Manager as of this date differ from the executed versions of the governing transaction documents, DBRS may assign lower finalized ratings to the Facilities or may avoid assigning finalized ratings to the Facilities altogether.

The provisional ratings reflect the following primary considerations:

(1) The Warehouse Agreement dated as of February 10, 2017.

(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 Invesco.

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 February 2026. 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 February 2026. For the avoidance of doubt, these ratings do not address the Senior Additional Interest Amount or the Mezzanine Additional Interest Amount.

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 that is used in assigning ratings 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 dbrs.com 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.