Kroll Bond Rating Agency Europe Limited (KBRA) assigns preliminary ratings to five classes of notes to be issued by BlackRock European CLO X Designated Activity Company (BlackRock Euro CLO X DAC), a cash flow collateralised loan obligation (CLO) back primarily by a diversified portfolio of Euro-denominated corporate loans and bonds.
BlackRock Euro CLO X DAC is managed by BlackRock Investment Management (UK) Limited ("BlackRock UK" or the "collateral manager"). The CLO will have a 3.0-year reinvestment period and a 13.0-year legal final. The preliminary ratings reflect initial credit enhancement levels, coverage tests including par value and interest coverage tests, excess spread, and a reinvestment overcollateralisation test.
The collateral in BlackRock Euro CLO X DAC will mainly consist of broadly syndicated leveraged loans and bonds issued by corporate obligors diversified across sectors. The obligors in the portfolio have a K-WARF of 2665, which represents a weighted average portfolio assessment of approximately B. The target portfolio par amount is €300.0 million with exposures to 130 obligors.
BlackRock UK currently has €3.8 billion in AUM across 9 European CLOs as of June 2020 and has been a consistent European CLO issuer since 2015. The manager is a wholly owned subsidiary of BlackRock, Inc., a global asset manager with approximately $7 trillion in assets under management (AUM), including approximately $12 billion in CLO AUM. The European credit and management team has significant industry experience.
The social and economic fallout from the novel coronavirus (COVID-19) pandemic will impact different corporate sectors to varying degrees but broadly, we expect pressure on corporate credit portfolio quality. KBRA assessed the risks of near-term potential credit deterioration across by increasing the portfolio's KBRA Weighted Average Rating Factor (K-WARF).
The preliminary ratings on the Class A and B Notes consider the timely payment of interest and ultimate payment of principal by the applicable stated maturity date, while the preliminary ratings on the Class C, D, and E notes consider the ultimate payment of interest and principal.
KBRA analysed the transaction using Structured Credit Global Rating Methodology published on 13 March 2020 and the and the Global Structured Finance Counterparty Methodology published on 8 August 2018.
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Related Publication
- Structured Credit Global Rating Methodology
Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the EU Information Disclosure Form located here
Information on the meaning of each rating category can be located here
Further disclosures relating to this rating action are available in the EU Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com
About KBRA Europe
KBRA Europe is a full-service credit rating agency (CRA) registered with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency, Inc. (KBRA) is a CRA registered as an NRSRO with the U.S. Securities and Exchange Commission and is a certified CRA with ESMA. KBRA is also recognized by the U.S. National Association of Insurance Commissioners as a Credit Rating Provider and is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.
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