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Fitch affirms Harbourmaster CLOs following amendments to deal docs
Fitch has taken ratings action on a couple of Harbourmaster CLOs after glitches in the CLOs' documentation were resolved. The indenture for the deals had left it unclear how to treat defaulted assets for the purpose of calculating tests. This meant that junior OC ratios continued to pass, benefiting equity investors.
Fitch has affirmed the ratings of Harbourmaster CLO 7 and upgraded its S4 and S5 combination notes from BB+ to BBB. The rating agency notes that since the issues surrounding the CLOs were resolved in July, funds have been released to pay down senior notes and for reinvestment.
The other CLO to receive ratings affirmation was Harbourmaster CLO 8. Both deals are now managed by GSO/Blackstone following its takeover of Harbourmaster Capital at the end of last year.
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CFlux secondary
CLO index levels:
| Index | 21 May |
|
| CFlux USD AAA | ↑ | 96.2 |
| CFlux USD AA | ↑ |
88.3 |
| CFlux USD A | ↓ | 84.1 |
| CFlux USD BBB | ↓ | 75.3 |
| CFlux USD BB | ↓ |
74.1 |
| CFlux USD EQ | ↑ | 77.5 |
As I understand it, although the indenture might have been unclear, all OC tests were calculated on a 'market standard' interpretation of the definition of defaulted assets, and so included haircuts for defaulted loans. The actions taken to resolve the issue were to remove any doubt over the correct interpretation. No change to how OC tests are calculated results from the amendments.