Fitch Rates Apollo Credit Funding IV Ltd./LLC

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings assigns the following rating and Rating Outlook to Apollo Credit Funding IV Ltd./LLC (Apollo IV):

--$298,500,000 class A-1 notes 'AAAsf'; Outlook Stable.

Fitch does not rate the class A-2, B, C, D, preferred shares or the delayed-draw notes corresponding to each class.

TRANSACTION SUMMARY

Apollo Credit Funding IV Ltd. (the issuer) and Apollo Credit Funding IV LLC (the co-issuer) represent an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Apollo ST Fund Management LLC (Apollo ST). Net proceeds from the issuance of the notes will be used to purchase a portfolio of approximately $466.5 million of leveraged loans. The CLO will have a four-year reinvestment period.

KEY RATING DRIVERS

Sufficient Credit Enhancement (CE): CE of 36.0% for class A-1, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The degree of CE available to class A-1 notes is slightly lower than the average CE of recent CLO issuances. Cash flow modeling indicates performance in line with other Fitch-rated CLO notes.

'B' Asset Quality: The average credit quality of the indicative portfolio is 'B', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality. However, in Fitch's opinion, class A-1 notes are unlikely to be affected by the foreseeable level of defaults. Class A-1 notes are robust against default rates of up to 60.8%.

Strong Recovery Expectations: The indicative portfolio consists of 94.1% first lien senior secured loans. Approximately 89.9% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher, resulting in a base case recovery assumption of 74.1%. In determining the ratings for class A-1, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions. The analysis of class A-1 assumed a 35.9% recovery rate in Fitch's 'AAAsf' scenario.

RATING SENSITIVITIES

In addition to Fitch's stated criteria, the agency analyzed the structure's sensitivity to the potential variability of key model assumptions including decreases in weighted average spread or recovery rates and increases in default rates or correlation. Fitch expects class A-1 to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'Asf' and 'AAAsf' for class A-1.

The sources of information used to assess these ratings were provided by the arranger, Mizuho Securities USA Inc., and the public domain.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available to investors on Fitch's website at 'www.fitchratings.com'.

For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at '[email protected]'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Global Structured Finance Rating Criteria' (Mar. 31, 2015);

--'Global Rating Criteria for Corporate CDOs' (July 25, 2014);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds' (Dec. 19, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014).

Applicable Criteria and Related Research:

Counterparty Criteria for Structured Finance and Covered Bonds

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

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=983955

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.

Fitch Ratings
Primary Analyst
Aaron Hughes
Director
+1-312-368-2074
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Bradley Howe, CFA
Associate Director
+1-312-368-2081
or
Committee Chairperson
Derek Miller
Senior Director
+1-312-368-2076
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Envision Delivers Low-Carbon Ammonia Environmental Attribute Certificates to PepsiCo APAC, Pioneering Decarbonization in the Fertilizer Industry
• Bekaert: Update on the Share Buyback Program and the Liquidity Agreement
• Caledonia Mining Corporation Plc Notification of Relevant Change to Significant Shareholder