Kroll Bond Rating Agency Europe Limited (KBRA) assigns preliminary ratings to six classes of notes to be issued by Bastille Euro CLO 2020-3 DAC, a cash flow collateralised loan obligation (CLO) backed primarily by a diversified portfolio of Euro-denominated corporate loans and bonds.
Bastille Euro CLO 2020-3 DAC is managed by CBAM CLO Management Europe, LLC ("CBAM Europe" or the "collateral manager"). The CLO will have a 3.8-year reinvestment period and a 13.2-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 Bastille Funding 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 2397, which represents a weighted average portfolio assessment of approximately B. The target portfolio par amount is €300.0 million with exposures to 95 obligors.
CBAM Europe is the European CLO management arm, and fully owned subsidiary, of CBAM Partners, LLC ("CBAM US"), which currently has over $13.0 billion in AUM as of August 2020. Through a supply and services agreement, the CBAM Europe platform will benefit from the credit research and support functions of CBAM US. The founders of CBAM US and the CBAM Europe management team have extensive experience managing CLOs and corporate credit.
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, B-1, and B-2 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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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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