Creditflux Newsletter

Fitch yesterday downgraded eight tranches of total rate of return (TRR) CLOs worth approximately US$335 million. The agency says the transactions have breached their TRS termination/liquidation triggers, for which Fitch has received confirmation from the trustee, banker, or asset manager that the TRS counterparty has elected to terminate the swap and liquidate the collateral.

This action, which resolves its rating watch on the transactions, follows previous actions taken by Fitch over the last few months, most recently Monday, in which the agency downgraded a total of 33 classes and placed a total of 65 classes on rating watch negative from 24 TRR CLOs.

In the case of the junior most classes in each transaction downgraded yesterday, Fitch expects minimal to no recovery. Given the volatility in loan prices, and resultant lack of information regarding ultimate recoveries, Fitch will assign DR ratings to the senior classes once liquidation of the underlying collateral has been completed.

Liquidation of the Aladdin Managed Letters Fund commenced yesterday, with other fund liquidations expected today.

Fitch has also received confirmation that Rivendell Loan Fund has breached its TRS termination/liquidation trigger. However, Nationwide Mutual Insurance Company, the collateral manager for that transaction, has infused additional funds into the deal in order to continue the transaction. As a result, Fitch is not currently taking any additional action on Rivendell.

Fitch has received information that another transaction that is nearing its TRS
termination/liquidation trigger is in the process of negotiating a capital infusion from the asset manager to continue and that a third transaction, also nearing a breach in its TRS termination/liquidation trigger, is exploring restructuring alternatives.

The following rating actions are effective immediately:

Aladdin Managed Letters Fund
-$43,000,000 class A to 'C' from 'CCC+';
-$22,500,000 class B to 'C/DR6' from 'CCC'.

Beecher Loan Fund
-$66,800,000 class A to 'C' from 'CC';
-$44,000,000 class B to 'C/DR6' from 'CC'..

Bushnell Loan Fund
-$38,300,000 class A to 'C' from 'CCC+';
-$25,000,000 class B to 'C/DR6' from 'CCC'..

Stedman Loan Fund
-$57,400,000 class A to 'C' from 'CCC+';
-$38,000,000 class B to 'C/DR6' from 'CCC'.