Fitch Affirms MCF CLO IV LLC

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the class A notes issued by MCF CLO IV LLC (MCF CLO IV) at 'AAAsf'. The Rating Outlook remains Stable.

KEY RATING DRIVERS

The affirmation is based on the credit enhancement (CE) available to the notes and the stable performance of the underlying portfolio since the transaction's inception in November 2014.

The loan portfolio par amount plus principal cash is approximately $402.6 million (excluding PIK and capitalized interest amounts), as of the Aug. 10, 2015 trustee report, resulting in increased credit enhancement for the class A notes. All collateral quality tests, concentration limitations, and coverage tests are in compliance, and there are no defaulted assets in the portfolio. The weighted average spread (WAS) has remained stable at 5.78%, and the weighted average rating factor (WARF) of the underlying portfolio remains at 'B/B-'. For this review, Fitch currently considers approximately 5.3% of the portfolio to be rated in the 'CCC' category, based upon Fitch's Issuer Default Rating (IDR) Equivalency Map. The loan portfolio is 100% invested in senior secured middle market (MM) loans, and the trustee reported a Fitch Weighted Average Recovery Rating (WARR) of 77%. Approximately 60.1% of the performing portfolio is considered to have strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.

The portfolio is managed to a "Fitch Test Matrix", featuring various combinations of permitted Fitch WARF, Fitch WARR, and WAS triggers. As of the effective date, the manager selected a maximum WARF of 44.0 ('B-/CCC'), minimum WARR of 70.5% and minimum WAS of 4.9%.

The Stable Outlook on the class A notes reflects the expectation that the notes have a sufficient level of credit protection to withstand potential deterioration in the credit quality of the portfolio.

RATING SENSITIVITIES

The ratings of the notes may be sensitive to the following: asset defaults, significant negative credit migration, lower than historically observed recoveries for defaulted assets, and breaches of concentration limitations or portfolio quality covenants. Rating sensitivities based off of the Fitch Stressed Portfolio were conducted at close. Given the stable performance of the portfolio, no updated cash flow modelling or additional sensitivities were run for this review.

MCF CLO IV is a MM collateralized loan obligation (CLO) that is managed by MCF Capital Management LLC (MCF). The transaction will remain in its reinvestment period until October 2018 and will mature in October 2025. Fitch's leveraged finance group provided model- and analyst-based credit opinions for all of the non-publicly rated loans in the portfolio, based on financial statements provided to Fitch by MCF.

DUE DILIGENCE USAGE

No third party due diligence was reviewed in relation to this rating action.

Fitch has affirmed the following rating:

--$228,500,000 class A notes at 'AAAsf'; Outlook Stable.

Fitch does not rate the class B, C, D, or E notes, or the equity interests.

Additional information is available at www.fitchratings.com.

Sources of Inforation:

The information used to assess these ratings was sourced from periodic servicer reports, note valuation reports, MCF and the public domain.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Rating Criteria for CLOs and Corporate CDOs (pub. 30 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868908

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=991214

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991214

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150923006139/en/

Fitch Ratings
Surveillance Analyst
Nazneen Kutty
Associate Director
+1-312-368-3217
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1-312-368-3184
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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