Fitch Ratings has affirmed the class A notes issued by Carlyle Global Market Strategies CLO 2012-1, Ltd. (CGMS CLO 2012-1) at 'AAAsf'. The Rating Outlook remains Stable.
KEY RATING DRIVERS
The affirmation is based on the stable performance of the underlying portfolio since the last review in January 2014 and the stable credit enhancement available to the notes. As of the Nov. 30, 2014 trustee report, the transaction continues to pass all of its coverage tests and collateral quality tests, except for the weighted average life (WAL) test, which it is failing by 0.05 years. There are no defaults in the underlying portfolio.
The loan portfolio par amount plus principal cash is approximately $500.6 million, compared to the effective date target balance of $494.2 million. The minimum weighted average spread (WAS) trigger is 4.05%, versus a current WAS of 4.18%, as reported by the trustee. Additionally, the weighted average rating factor of 'B+/B' slightly improved from 'B/B-' at the last review. Fitch considers 3.7% of the collateral assets to be rated in the 'CCC' category versus 8.5% at the last review, based on Fitch's Issuer Default Rating (IDR) Equivalency Map. Currently, 87.1% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.
The Stable Outlook reflects the expectation that the class A notes have a sufficient level of credit protection to withstand potential deterioration in the credit quality of the portfolio, based on the results of the Fitch sensitivity analysis described below.
RATING SENSITIVITIES
The ratings of the notes may be sensitive to the following: asset defaults, portfolio migration, including assets being downgraded to 'CCC', portions of the portfolio being placed on Rating Watch Negative, overcollateralization (OC) or interest coverage (IC) test breaches, or breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of CGMS CLO 2012-1, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities.
CGMS CLO 2012-1 is an arbitrage, cash flow collateralized loan obligation (CLO) that is managed by Carlyle Investment Management LLC. The net proceeds from the note issuance have been invested a portfolio of primarily senior secured leveraged loans. The transaction exits its reinvestment period in April 2016.
This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. Given the stable performance of the deal since closing in March 2012, no updated cash flow modeling was completed.
Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on April 24, 2012. A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that asset class is also available by accessing the reports and links indicated below.
Fitch has affirmed the following ratings:
--$320,000,000 class A notes 'AAAsf'; Outlook Stable;
Fitch does not rate the class B, C, D, E, F, Combination Notes or Subordinated Notes.
Additional information is available at 'www.fitchratings.com'.
The information used to assess these ratings was sourced from periodic servicer reports, note valuation reports, and the public domain.
Applicable Criteria & Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'Global Rating Criteria for Corporate CDOs' (July 25, 2014);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);
--'Carlyle Global Market Strategies CLO 2012-1 Ltd. New Issue Report' (April 24, 2012);
--'Carlyle Global Market Strategies CLO 2012-1 Ltd. - Appendix' (April 24, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Global Rating Criteria for Corporate CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057
Counterparty Criteria for Structured Finance and Covered Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Carlyle Global Market Strategies CLO 2012-1, Ltd. -- Appendix
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677657
Carlyle Global Market Strategies CLO 2012-1 Ltd.
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676371
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=969015
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