DBRS Assigns Provisional Rating to the Senior Funding Facility of Hatfield Warehouse I

DBRS, Inc. (DBRS) assigned the following provisional rating to the Senior Funding Facility (the Facility) of Hatfield Warehouse I:

-- Senior Funding Facility due October 2027 rated BBB (sf)

The provisional rating of the the Facility is being assigned pursuant to the Warehouse Agreement dated as of October 26, 2018, between Hatfield Warehouse I as Borrower; Barclays Bank PLC, New York Branch (Barclays) as Facility Agent and Lender; Alcentra NY, LLC (Alcentra) as Collateral Manager; the LLC Members named on the signature page thereto; The Bank of New York Mellon Trust Company, N.A. as Collateral Administrator and Securities Intermediary; and Delaware Trust Company as Security Agent.

The Borrower is a limited liability company established 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 will act as the Collateral Manager of the Borrower.

The Borrower will start to draw on the Senior Funding 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 October 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 October 2027, 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 Party (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 Party (Barclays) may, in its sole option, elect to designate an Acceleration Date and liquidate the portfolio.

The transaction contains collateral manager and subordinated lender types of Events of Default, which could lead to acceleration and liquidation. However, the transaction is at closing a single-lender facility, where Barclays retains 100% of the rated Facility. If at any time additional lenders are admitted into either rated facility, DBRS may either take a rating action or withdraw the rating on such facility at that time, subject to future amendments.

DBRS’s rating analysis does not take into account the risk of loss due to liquidation at market prices after an Event of Default has occurred.

The above rating on the Senior Funding Facility is provisional. A finalized rating will be issued upon receipt of confirmation that the aggregated funding amount of the Senior Funding Facility has reached $50 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 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 October 26, 2018.

(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 CLO management capabilities of Alcentra.

The rating on the Facility addresses the timely payment of the Senior Base Interest Amount and Senior Additional Payment Amounts and the ultimate payment of the Outstanding Senior Funding Amount on or before the Scheduled Maturity Date in October 2027. For the avoidance of doubt, this rating does not address the Senior 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 a rating; rather, they represent a primarily 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 dbrs.com under Methodologies.

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.

For more information on this credit or on this industry, visit www.dbrs.com, or contact us at info@dbrs.com.