Fitch Rates Dryden 38 Senior Loan Fund/LLC

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings and Rating Outlooks to Dryden 38 Senior Loan Fund/LLC (Dryden 38):

--$4,000,000 class X notes 'AAAsf'; Outlook Stable;

--$310,000,000 class A notes 'AAAsf'; Outlook Stable.

Fitch does not rate the class B, C, D-1, D-2, E or subordinated notes.

TRANSACTION SUMMARY

Dryden 38 Senior Loan Fund (the issuer) and Dryden 38 Senior Loan Fund LLC (the co-issuer) represent an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Prudential Investment Management, Inc. (Prudential). Net proceeds from the issuance of notes will be used to purchase a portfolio of approximately $500 million of leveraged loans. The CLO will have a five-year reinvestment period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 38% for class A, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE for the class A notes is above the average for recent CLO issuances. Class X notes are expected to be paid in full from the application of interest proceeds via the interest waterfall.

'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is slightly better than that of recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality. However, in Fitch's opinion, the class X and A notes are unlikely to be affected by the foreseeable level of defaults. The class X and A notes are robust against default rates of up to 100% and 60.3%, respectively.

Strong Recovery Expectations: The indicative portfolio consists of 97.7% first-lien senior-secured loans. Approximately 92.3% 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 78%. In determining of the ratings for class X and A notes, 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 Dryden 38 class X and A notes assumed a 36.4% recovery rate in Fitch's 'AAAsf' scenario.

RATING SENSITIVITIES

Fitch evaluated 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 the class A notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios remained at 'AAAsf' for class X notes and ranged between 'A-sf' and 'AAAsf' for class A notes.

Sources of information used to assess these ratings were provided by the arranger, Morgan Stanley & Co. LLC, and the public domain.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which is 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' (March 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: Dryden 38 Senior Loan Fund /LLC

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865645

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

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

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

Counterparty Criteria for Structured Finance and Covered Bonds

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984393

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

Source: Fitch Ratings

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