Kroll Bond Rating Agency UK Limited (KBRA) assigns preliminary ratings to eight classes of notes to be issued by Avoca CLO XXII DAC, a cash flow collateralised loan obligation (CLO) backed primarily by a diversified portfolio of Euro-denominated corporate loans and bonds.
Avoca CLO XXII DAC is managed by KKR Credit Advisors (Ireland) Unlimited Company (KKR Credit Ireland or the "collateral manager"). The CLO will have a 4.1-year reinvestment period and a 14.1-year legal final. The 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 Avoca CLO XXII DAC will mainly consist of broadly syndicated leveraged loans and bonds issued by corporate obligors diversified across sectors. The target portfolio par amount is €400.0 million with exposures to 159 obligors. The obligors in the portfolio have a K-WARF of 2474, which represents a weighted average portfolio assessment of approximately B. Due to the economic fallout from COVID-19, we expect pressure on overall portfolio credit quality. As such, it is likely that the portfolio's K-WARF will increase in the near term. KBRA considered the impact of potential credit migration.
KKR Credit Advisors (Ireland) Unlimited Company, is an Irish resident company formed in 2002 to manage European debt. KKR Credit Ireland, formerly Avoca Capital, was acquired by KKR Co. L.P. in 2014 and is a relying adviser of KKR Credit US (KKR), a global asset manager founded in 1976. KKR is a global asset management platform with approximately $234 billion in assets under management (AUM) as of January 2021, including approximately $75 billion across leveraged credit, private credit, and special situations. Headquartered in New York, New York, KKR employs over 430 investment professionals across 9 cities in 8 countries. The European leveraged credit leadership team has over 20 years of industry experience. Dedicated leveraged credit sector analysts and traders with various levels of experience are based in Dublin and London and are supported by risk, compliance, and credit strategies functions.
The ratings on the Class X, 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 its ratings on the Class C, D, E and F notes consider the ultimate payment of interest and principal.
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Related Publications
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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 Information Disclosure Form(s) located here
Information on the meaning of each rating category can be located here
This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union. Information on a credit rating's endorsement status is available on its rating page at KBRA.com.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com
About KBRA UK
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA 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. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider. Kroll Bond Rating Agency UK is located at Augustine House, Austin Friars, London, EC2N 2HA, United Kingdom.
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Contacts:
Analytical Contacts
Gabriele Gramazio, Director (Lead Analyst)
+44 (20) 8148 1001
gabriele.gramazio@kbra.com
John Hogan, Senior Director
+44 208 148 1040
john.hogan@kbra.com
Kathy Song, CFA, Associate Director
+1 (646) 731-1209
ksong@kbra.com
Eric Hudson, Senior Managing Director (Rating Committee Chair)
+1 (646) 731-3320
ehudson@kbra.com
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mauricio.noe@kbra.com
