$77.4 million of notes affected
New York, September 09, 2022 — Moody’s Buyers Service has upgraded the scores on the next notes issued by Allegro CLO IV, Ltd.:
U.S.$52,650,000 Class B-R2 Senior Secured Floating Charge Notes due 2030, Upgraded to Aaa (sf); beforehand on Could 24, 2021 Assigned Aa1 (sf)
U.S.$24,750,000 Class C-R2 Mezzanine Secured Deferrable Floating Charge Notes due 2030, Upgraded to Aa3 (sf); beforehand on Could 24, 2021 Assigned A1 (sf)
Allegro CLO IV, Ltd., initially issued in December 2016 refinanced in July 2019 and partially refinanced in Could 2021 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 led to January 2021.
RATINGS RATIONALE
These score actions are primarily a results of deleveraging of the senior notes and a rise within the transaction’s over-collateralization (OC) ratios since August 2021. The Class A-R2 notes have been paid down by roughly 16.1% or $42.7 million since August 2021. Primarily based on the trustee’s August 2022 report[1], the OC ratios for the Class A/B and Class C notes are reported at 134.05% and 122.98%, respectively versus August 2021 ranges of 129.37% and 120.02%[2], respectively.
The deal has additionally benefited from an enchancment within the credit score high quality of the portfolio since August 2021. Primarily based on the trustee’s August 2022 report[3], the weighted common score issue (WARF) is presently 2737 in comparison with 2858 in August 2021[4].
Moody’s modeled the transaction utilizing a money move mannequin primarily based on the Binomial Enlargement Approach, as described in “Moody’s International Strategy to Ranking Collateralized Mortgage Obligations.”
The important thing mannequin inputs Moody’s utilized in its evaluation, reminiscent of par, weighted common score issue, range rating, weighted common unfold, and weighted common restoration charge, are primarily based 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: $368,336,797
Defaulted par: $1,149,890
Variety Rating: 68
Weighted Common Ranking Issue (WARF): 2741
Weighted Common Unfold (WAS) (earlier than accounting for reference charge flooring): 3.35%
Weighted Common Restoration Charge (WARR): 47.48%
Weighted Common Life (WAL): 3.7 years
Along with base case evaluation, Moody’s thought-about extra eventualities the place outcomes may diverge from the bottom case. These extra eventualities embody, amongst others, close to time period defaults by corporations going through liquidity stress, deterioration in credit score high quality of the underlying portfolio, lower in general WAS and decrease recoveries on defaulted property.
Methodology Used for the Ranking Motion
The principal methodology utilized in these scores was “Moody’s International Strategy to Ranking Collateralized Mortgage Obligations” revealed in December 2021 and accessible at https://scores.moodys.com/api/rmc-documents/74832. Alternatively, please see the Ranking Methodologies web page on https://scores.moodys.com for a replica of this technique.
Components that Would Result in an Improve or Downgrade of the Scores:
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 relies on financial and credit score circumstances that 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 score assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Ranking Symbols and Definitions could 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 incidence to every stage of doable losses within the collateral. As a second step, Moody’s evaluates every doable collateral loss situation utilizing a mannequin that replicates the related structural options to derive funds and due to this fact the last word potential losses for every rated instrument. The loss a rated instrument incurs in every collateral loss situation, weighted by assumptions concerning the chance of occasions in that situation occurring, leads to the anticipated lack of the rated instrument.
Moody’s quantitative evaluation entails an analysis of eventualities that stress elements contributing to sensitivity of scores and have in mind the chance of extreme collateral losses or impaired money flows. Moody’s weights the impression on the rated devices primarily based on its assumptions of the chance of the occasions in such eventualities occurring.
For scores issued on a program, collection, class/class of debt or safety this announcement offers sure regulatory disclosures in relation to every score of a subsequently issued bond or be aware of the identical collection, class/class of debt, safety or pursuant to a program for which the scores are derived solely from present scores in accordance with Moody’s score practices. For scores issued on a assist supplier, this announcement offers sure regulatory disclosures in relation to the credit standing motion on the assist supplier and in relation to every specific credit standing motion for securities that derive their credit score scores from the assist supplier’s credit standing. For provisional scores, this announcement offers sure regulatory disclosures in relation to the provisional score assigned, and in relation to a definitive score that could 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 task of the definitive score in a way that might have affected the score. For additional data 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 assist from the first entity(ies) of this credit standing motion, and whose scores might change on account of this credit standing motion, the related regulatory disclosures will probably be these of the guarantor entity. Exceptions to this strategy 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 consult with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Scores accessible 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 score outlook or score overview.
Moody’s common ideas for assessing environmental, social and governance (ESG) dangers in our credit score evaluation could be discovered at https://scores.moodys.com/paperwork/PBC_1288235.
The International Scale Credit score Ranking on this Credit score Ranking Announcement was issued by certainly one of Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Primary 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Ranking Businesses. Additional data on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is out there on https://scores.moodys.com.
The International Scale Credit score Ranking on this Credit score Ranking Announcement was issued by certainly one of 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 businesses within the UK. Additional data on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is out there on https://scores.moodys.com.
REFERENCES/CITATIONS
[1] Trustee report 04-August-2022
[2] Trustee report 05-August-2021
[3] Trustee report 04-August-2022
[4] Trustee report 05-August-2021
Please see https://scores.moodys.com for any updates on modifications to the lead score analyst and to the Moody’s authorized entity that has issued the score.
Please see the issuer/deal web page on https://scores.moodys.com for added regulatory disclosures for every credit standing.
Mario Jadotte
Asst Vice President – Analyst
Structured Finance Group
Moody’s Buyers Service, Inc.
250 Greenwich Avenue
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653
Aniket Deshpande
VP – Sr Credit score Officer/Supervisor
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653
Releasing Workplace:
Moody’s Buyers Service, Inc.
250 Greenwich Avenue
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653
