Ratings Assigned To European Cash Flow Transaction Carlyle Euro CLO 2017-2

Stocks and Financial Services Press Releases Thursday August 3, 2017 17:27
LONDON--3 Aug--S&P Global Ratings

LONDON (S&P Global Ratings) Aug. 3, 2017--S&P Global Ratings today assigned its credit ratings to Carlyle Euro CLO 2017-2 DAC's floating-rate class A-1, A-2-A, A-2-B, B, C, D, and E notes. At closing, Carlyle Euro CLO 2017-2 also issued an unrated subordinated class of notes (see list below).

Carlyle Euro CLO 2017-2 is a European cash flow collateralized loan obligation (CLO) transaction, securitizing a portfolio of primarily senior secured euro-denominated leveraged loans and bonds issued by European borrowers. CELF Advisors LLP is the collateral manager.

Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following such an event, the notes permanently switch to semiannual payment. The portfolio's reinvestment period ends approximately four years after closing.

Our ratings reflect our assessment of the collateral portfolio's credit quality, which has a weighted-average 'B' rating. The portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations (see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Aug. 8, 2016).

In our cash flow analysis, we used the €450 million target par amount, the covenanted weighted-average spread (3.70%), the covenanted weighted-average coupon (4.75%), the target minimum weighted-average recovery rates at the 'AAA' level, and the actual weighted-average recovery rates for all other rating levels. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category.

Elavon Financial Services DAC, U.K. Branch is the bank account provider and custodian. The documented downgrade remedies are in line with our current counterparty criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013).

Following the application of our structured finance ratings above the sovereign criteria, we consider that the transaction's exposure to country risk is sufficiently mitigated at the assigned rating levels (see "Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions," published Aug. 8, 2016).

The issuer is bankruptcy remote, in accordance with our legal criteria (see "Structured Finance: Asset Isolation And Special-Purpose Entity Methodology," published on March 29, 2017).
Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our ratings are commensurate with the available credit enhancement for each class of notes.

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