DBRS Assigns Provisional Rating to the Funding Facility of Shackleton 2017-XI CLO Funding LLC
Structured CreditDBRS, Inc. (DBRS) has today assigned the following provisional rating to the Funding Facility (the Facility) of Shackleton 2017-XI CLO Funding LLC:
-- Funding Facility due April 2026 rated BBB (sf)
The provisional rating on the Facility is being assigned pursuant to the Warehouse Agreement, dated as of April 18, 2017, between Shackleton 2017-XI CLO Funding LLC as Borrower; Barclays Bank PLC (New York Branch) (Barclays) as Facility Agent; Alcentra NY, LLC (Alcentra NY) as Collateral Manager; and the U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS) as Collateral Administrator, Securities Intermediary and Security Agent.
The Borrower is a limited liability company (LLC) 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. Alcentra NY will act as the Collateral Manager of the Borrower.
The Borrower will start to draw on the Facility 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 April 2019, followed by an amortization period. The warehouse will reach its maturity date at the earliest of the Collateralized Loan Obligation (CLO) Closing Date; the Scheduled Maturity Date in April 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 12 months after the reinvestment period end date) at the sole option of the Instructing Party (Barclays) or by the Borrower with the consent of a majority of the LLC Members following an Event of Default. Under the Warehouse Agreement, upon an occurrence of (and during the continuation of) an Event of Default, the Instructing Party may also, in its sole option, elect to designate an Acceleration Date and liquidate the portfolio.
The above rating on the Facility is provisional. A finalized rating will be issued upon receipt of confirmation that the aggregated funding amount of the Facility has reached $30 million 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 (rated A (high) with a Negative trend by DBRS) and the Collateral Manager as of this date differ from the executed versions of the governing transaction documents, DBRS may assign a lower finalized rating to the Facility or may avoid assigning a finalized rating to the Facility altogether.
The provisional rating reflects the following primary considerations:
(1) The Warehouse Agreement dated as of April 18, 2017.
(2) The integrity of the transaction structure.
(3) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.
The finalized rating will reflect the above considerations but will also take into consideration an assessment of the capabilities of the Collateral Manager as they relate to CLO management. As of the date of this provisional rating, DBRS has not yet evaluated Alcentra NY as a Collateral Manager. DBRS will perform an assessment of the origination and servicing capabilities of the Collateral Manager prior to finalizing its rating on the Facility.
The rating on the Facility addresses the timely payment of the Base Interest Amount and Additional Payment Amount and ultimate payment of the Outstanding Funding Amount on or before the Scheduled Maturity Date in April 2026. For the avoidance of doubt, this rating does not address the 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 a 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.
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