$90 million of notes affected
New York, September 08, 2022 — Moody’s Buyers Service (“Moody’s”) has upgraded the scores on the next notes issued by KKR CLO 12 Ltd.:
U.S.$44,800,000 Class B-R2 Senior Secured Floating Price Notes due 2030, Upgraded to Aa1 (sf); beforehand on October 3, 2018 Definitive Score Assigned Aa2 (sf)
U.S.$19,500,000 Class C-R2 Senior Secured Deferrable Floating Price Notes due 2030, Upgraded to A1 (sf); beforehand on October 6, 2020 Confirmed at A2 (sf)
U.S.$25,700,000 Class D-R2 Senior Secured Deferrable Floating Price Notes due 2030, Upgraded to Baa2 (sf); beforehand on October 6, 2020 Confirmed at Baa3 (sf)
KKR CLO 12 Ltd., initially issued in August 2015 and refinanced in August 2017 and October 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured company loans. The transaction’s reinvestment interval will finish in October 2022.
RATINGS RATIONALE
These ranking actions mirror the good thing about the brief time period remaining earlier than the tip of the deal’s reinvestment interval in October 2022. In gentle of the reinvestment restrictions through the amortization interval which restrict the power of the supervisor to impact vital modifications to the present collateral pool, Moody’s analyzed the deal assuming the next chance that the collateral pool traits can be maintained and proceed to fulfill sure covenant necessities. Specifically, Moody’s assumed that the deal will profit from decrease WARF in comparison with the covenant degree. Moody’s modeled a WARF of 2836 in comparison with its present covenant degree of 2961.
Moreover, the ranking actions mirror the advance in offers over-collateralization (OC) ranges since August 2021. Based mostly on trustee’s July 2022 report [1], the OC ratios for the Class A-R2/B-R2, Class C-R2, Class D-R2 and Class E-R2 notes are reported at 132.66%, 124.59%, 115.33% and 108.44%, respectively, versus August 2021 ranges [2] of 131.47%, 123.46%, 114.29% and 107.46%, respectively.
Moody’s modeled the transaction utilizing a money circulate mannequin based mostly on the Binomial Enlargement Approach, as described in “Moody’s International Method to Score Collateralized Mortgage Obligations.”
The important thing mannequin inputs Moody’s utilized in its evaluation, akin to par, weighted common ranking issue, variety rating, weighted common unfold, and weighted common restoration fee, are based mostly on its revealed methodology and will differ from the trustee’s reported numbers. For modeling functions, Moody’s used the next base-case assumptions:
Performing par and principal proceeds steadiness: $399,046,984
Defaulted par: $2,164,408
Range Rating: 74
Weighted Common Score Issue (WARF): 2836
Weighted Common Unfold (WAS) (earlier than accounting for reference fee flooring): 3.64%
Weighted Common Coupon (WAC): 13.00%
Weighted Common Restoration Price (WARR): 47.30%
Weighted Common Life (WAL): 4.8 years
Along with the bottom case evaluation, Moody’s thought of further eventualities the place outcomes may diverge from the bottom case. The extra eventualities embrace, amongst others, deterioration in credit score high quality of the underlying portfolio, lower in total WAS and decrease recoveries on defaulted property.
Methodology Used for the Score Motion
The principal methodology utilized in these scores was “Moody’s International Method to Score Collateralized Mortgage Obligations” revealed in December 2021 and obtainable at https://scores.moodys.com/api/rmc-documents/74832. Alternatively, please see the Score Methodologies web page on https://scores.moodys.com for a duplicate of this system.
Components that Would Result in an Improve or Downgrade of the Rankings:
The efficiency of the rated notes is topic to uncertainty. The efficiency of the rated notes is delicate to the efficiency of the underlying portfolio, which in flip is determined by financial and credit score situations which will change. The Supervisor’s funding selections and administration of the transaction can even have an effect on the efficiency of the rated notes.
REGULATORY DISCLOSURES
For additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Score Symbols and Definitions might be discovered on https://scores.moodys.com/rating-definitions.
The evaluation depends on an evaluation of collateral traits to find out the collateral loss distribution, that’s, the perform that correlates to an assumption concerning the chance of prevalence to every degree of potential losses within the collateral. As a second step, Moody’s evaluates every potential collateral loss state of affairs utilizing a mannequin that replicates the related structural options to derive funds and subsequently the last word potential losses for every rated instrument. The loss a rated instrument incurs in every collateral loss state of affairs, weighted by assumptions concerning the chance of occasions in that state of affairs occurring, leads to the anticipated lack of the rated instrument.
Moody’s quantitative evaluation entails an analysis of eventualities that stress components contributing to sensitivity of scores and bear in mind the chance of extreme collateral losses or impaired money flows. Moody’s weights the affect on the rated devices based mostly on its assumptions of the chance of the occasions in such eventualities occurring.
For scores issued on a program, sequence, class/class of debt or safety this announcement supplies sure regulatory disclosures in relation to every ranking of a subsequently issued bond or observe of the identical sequence, class/class of debt, safety or pursuant to a program for which the scores are derived completely from present scores in accordance with Moody’s ranking practices. For scores issued on a help supplier, this announcement supplies sure regulatory disclosures in relation to the credit standing motion on the help supplier and in relation to every explicit credit standing motion for securities that derive their credit score scores from the help supplier’s credit standing. For provisional scores, this announcement supplies sure regulatory disclosures in relation to the provisional ranking assigned, and in relation to a definitive ranking which may be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the project of the definitive ranking in a fashion that might have affected the ranking. For additional info please see the issuer/deal web page for the respective issuer on https://scores.moodys.com.
For any affected securities or rated entities receiving direct credit score help from the first entity(ies) of this credit standing motion, and whose scores could change because of this credit standing motion, the related regulatory disclosures can be these of the guarantor entity. Exceptions to this method exist for the next disclosures, if relevant to jurisdiction: Ancillary Companies, Disclosure to rated entity, Disclosure from rated entity.
The scores have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.
These scores are solicited. Please seek advice from Moody’s Coverage for Designating and Assigning Unsolicited Credit score Rankings obtainable on its web site https://scores.moodys.com.
Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking overview.
Moody’s common ideas for assessing environmental, social and governance (ESG) dangers in our credit score evaluation might be discovered at https://scores.moodys.com/paperwork/PBC_1288235.
The International Scale Credit score Score on this Credit score Score Announcement was issued by one in all Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Essential 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Score Companies. Additional info on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is accessible on https://scores.moodys.com.
The International Scale Credit score Score on this Credit score Score Announcement was issued by one in all Moody’s associates outdoors the UK and is endorsed by Moody’s Buyers Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA below the regulation relevant to credit standing companies within the UK. Additional info on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is accessible on https://scores.moodys.com.
REFERENCES/CITATIONS
[1] Trustee report 29-Jul-2022
[2] Trustee report 31-Aug-2021
Please see https://scores.moodys.com for any updates on modifications to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.
Please see the issuer/deal web page on https://scores.moodys.com for added regulatory disclosures for every credit standing.
Nalin Aeron
Vice President – Senior Analyst
Structured Finance Group
Moody’s Buyers Service, Inc.
250 Greenwich Road
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653
David Ham
VP – Senior Credit score Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653
Releasing Workplace:
Moody’s Buyers Service, Inc.
250 Greenwich Road
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653
