DBRS Confirms Ratings on GLM EUR BAR WH D.A.C.

DBRS Ratings GmbH (DBRS) confirmed its ratings on the Senior Funding Facility (SFF) and the Senior Mezzanine Funding Facility (SMFF; together, the Facilities) of GLM EUR BAR WH D.A.C. (the Borrower) at A (high) (sf) and BBB (low) (sf), respectively.

The rating on the SFF addresses the timely payment of interest and the ultimate payment of principal payable on or before the Warehouse Termination Date in December 2030. The rating on the SMFF addresses the ultimate payment of interest and principal payable on or before the Warehouse Termination Date in December 2030. The warehouse documents were executed in December 2017, with amendments in April 2018, May 2018 and December 2018.

The Borrower is a designated activity company incorporated under the laws of the Republic of Ireland. The warehouse transaction is set up as a cash flow securitisation collateralised by a portfolio of leveraged loans and high-yield bonds subject to eligibility criteria, collateral quality and portfolio profile tests. GoldenTree Loan Management, LP acts the Borrower’s Collateral Manager (CM).

As of 31 May 2019, the transaction portfolio consisted of EUR 176.7 million of collateral obligations extended to 56 borrowers. The Borrower will continue to draw on the Facilities based on a predetermined schedule as trades settle. Upon each drawing request, the CM will ensure that certain tests are in compliance on an asset-traded balance.
The warehouse will reach its maturity date at the earliest of the Final CLO Closing Date, the Optional Early Redemption Date, the Mandatory Early Redemption Date and December 2030.

Bank of New York Mellon – London Branch acts as the Account Bank. As per the transaction documentation, if the rating of the Account Bank is either withdrawn or downgraded below “A”, such entity must be replaced within 30 calendar days by a financial institution with a DBRS public rating of “A”.

DBRS has analysed the current portfolio which is currently utilising the non-mark-to-market (Non-MtM) 3,000 matrix structure. The Non-MtM format total capitalisation of EUR 200 million constitutes an SFF size of EUR 137.5 million, an SMFF size of EUR 12.5 million and the remaining EUR 50 million in equity. In pre-pricing scenarios, the equity size gradually increases to EUR 50 million from EUR 5 million; the MFF size can be increased or reduced to provide credit enhancement to the SFF.

DBRS used the publicly available CLO Asset Model to determine a lifetime pool default rate at the related rating levels for each drawing point. The CLO Asset Model takes key covenants of the portfolio to create a stressed modelling pool for each level of the drawing schedule based on the covenants. The CLO Asset Model employs a Monte Carlo simulation to determine cumulative default rates (or hurdle rates) at each rating stress level. Break-even default rates on the Facilities were determined in accordance with DBRS’s “Cash Flow Assumptions for Corporate Credit Securitizations” methodology.

For the underlying collateral analysis, DBRS will either use (1) its own publicly available ratings of each obligor; (2) where such ratings are not available, DBRS will use publicly available obligor ratings from other Nationally Recognized Statistical Rating Organizations (NRSRO); and (3) if no public ratings are available, then the CM is obligated to provide the necessary information to DBRS to complete the Credit Estimate. Such Credit Estimates will be used to continuously monitor the transaction.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- The transaction structure, the form and sufficiency of available credit enhancement as well as the portfolio characteristics. Most of the portfolio profile tests are set at a portfolio notional of EUR 200 million at all times.
-- The transaction parties’ financial strength and capabilities to perform their respective duties and the quality of origination, underwriting and servicing practices.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay lenders according to the terms of their investment. Interest and principal payments on the Facilities will accrue and are payable quarterly.
-- The soundness of the legal structure, the presence of legal opinions that address the true sale of the assets to the Borrower, the non-consolidation of the Borrower and consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

On 23 May 2019, DBRS transferred the ongoing coverage of the ratings assigned to the Facilities to DBRS Ratings GmbH from DBRS Ratings Limited. The lead analyst responsibilities for the transaction have been transferred to Shalva Beshia.

Both DBRS Ratings Limited and DBRS Ratings GmbH are registered with the European Securities and Markets Authority (ESMA) under Regulation (EC) No. 1060/2009 on Credit Rating Agencies, as amended, and are registered NRSRO affiliates in the United States and Designated Rating Organization (DRO) affiliates in Canada.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Rating CLOs and CDOs of Large Corporate Credit”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.

The sources of data and information used for this rating include the Borrower, the CM and the Senior and Mezzanine Lender.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on the Issuer took place on 29 June 2018 when DBRS assigned ratings of A (high) (sf) and BBB (low) (sf) to the SFF and SMFF, respectively. The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

Drawdown Structure of total EUR 200 million warehouse: for the point in the matrix with the warehouse notional amount is expected to be EUR 185 Million.

-- An increase in Risk Score by 15% would have no impact on the SFF and also have no impact on the SMFF.
-- An increase in Risk Score by 30% would have no impact on the SFF and also have no impact on the SMFF.

For the last point in the matrix, in a pre-pricing scenario, the warehouse notional amount is expected to be EUR 200 million.

-- An increase in Risk Score by 15% would have no impact on the SFF and also have no impact on the SMFF.
-- An increase in Risk Score by 30% would lead to a downgrade of the SFF to A (low) (sf) and with no impact on the SMFF.

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 29 June 2018

DBRS Ratings GmbH
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Geschäftsführer: Detlef Scholz
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Ratings issued and monitored by DBRS Ratings GmbH are noted as such on the DBRS website; however, the language and related statements in previously published press releases in respect of the relevant ratings will not be changed retroactively and will remain as part of DBRS’s historical record. The ratings issued and monitored in the European Union are marked as such in their respective rating tables. As part of this transfer, these markings will remain unchanged on all active ratings related to the Issuers.

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

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

This press release was amended on 27 September 2019 to reflect the fact that DBRS was not supplied with third-party assessments and that this did not impact the rating analysis.