NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded eight classes of notes and affirmed one class of notes issued by Race Point II CLO, Ltd./Inc. (Race Point II CLO) and assigned Rating Outlooks as follows:
--$59,400,501 class A-1 notes affirmed at 'AAAsf'; Outlook Stable;
--$15,000,000 class A-2 notes upgraded to 'AAAsf from 'AAsf'; Outlook Stable;
--$15,000,000 class B-1 notes upgraded to 'Asf' from 'BBsf'; Outlook Stable;
--$38,000,000 class B-2 notes upgraded to 'Asf' from 'BBsf'; Outlook Stable;
--$12,000,000 class C-1 notes upgraded to 'BBBsf' from 'Bsf'; Outlook Stable;
--$5,000,000 class C-2 notes upgraded to 'BBBsf' from 'Bsf'; Outlook Stable;
--$3,500,000 class D-1 notes upgraded to 'BBsf' from 'CCCsf'; Outlook Stable;
--$3,000,000 class D-2 notes upgraded to 'BBsf' from 'CCCsf'; Outlook Stable;
--$4,000,000 class D-3 notes upgraded to 'BBsf' from 'CCCsf'; Outlook Stable.
The affirmation of class A-1, and the upgrades to the class A-2, B-1, B-2 (class B), C-1, C-2 (Class C), D-1, D-2 and D-3 (class D) notes, are due to significant deleveraging of the capital structure, which has resulted in improved credit enhancement for all classes of notes, in addition to the relatively stable performance of the underlying loan portfolio. Fitch also maintains Stable Outlooks on the notes reflecting its expectation of stable rating performance over the next one to two years.
Since the last review, the class A-1 notes have received approximately $151 million of principal payments, representing 37.6% of their initial balance. The quality of the $202 million performing portfolio has remained relatively stable with the average rating staying at 'B/B-' and exposure to defaulted assets slightly decreasing to $3.3 million from $5.5 million. As of the Nov. 1, 2011 trustee report, all overcollateralization and interest coverage tests are passing there minimum thresholds with sizeable amounts of cushion. However, the weighted average life of the portfolio exceeds the maximum threshold by 1.2 years and approximately 63.1% of the performing portfolio is scheduled to mature during or after 2014; with an additional 9.2% scheduled to mature after the stated maturity of the transaction.
This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. While Fitch's cash flow analysis indicates higher passing rating levels for the class B, C and D notes, the upgrades sufficiently capture the improvements in credit enhancement while accounting for the profile of the remaining portfolio.
Race Point II CLO is a collateralized debt obligation (CDO) that closed on April 16, 2003 and is managed by Sankaty Advisors, LLC. The transaction's reinvestment period ended in May 2009. The portfolio primarily consists of senior secured loans (87%), with the remaining portfolio comprised of second lien loans (2.2%) and bonds (11%). The stated maturity of the transaction is May 15, 2015.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The information used to assess these ratings was sourced from the asset manager, periodic servicer reports, note valuation reports, and the public domain.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Global Rating Criteria for Corporate CDOs' (Aug 10, 2011);
--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 15, 2011);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (March 21, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569
Global Rating Criteria for Corporate CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=641789
Global Criteria for Cash Flow Analysis in CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=650717
Criteria for Interest Rate Stresses in Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=605426
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.