Fitch Rates GoldenTree Loan Opportunities X, Limited/LLC

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings to GoldenTree Loan Opportunities X, Limited/LLC:

--$4,500,000 class X notes 'AAAsf'; Outlook Stable;

--$225,000,000 class A-1 notes 'AAAsf'; Outlook Stable;

--$195,000,000 class A-2 notes 'AAAsf'; Outlook Stable.

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

TRANSACTION SUMMARY

GoldenTree Loan Opportunities X, Limited (the issuer) and GoldenTree Loan Opportunities X, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by GoldenTree Asset Management LP (GoldenTree). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $700 million of primarily senior secured leveraged loans. The CLO will have approximately a five-year reinvestment period and three-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 40% for class A-1 and A-2 (collectively, class A) notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in an 'AAAsf' stress scenario. The degree of CE available to class A notes is higher than the average CE of recent CLO issuances. The class X notes are expected to be paid in full from the interest waterfall by the second payment date.

'B/B-' Asset Quality: The average credit quality of the indicative portfolio is 'B/B-', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch's opinion, class X and A notes are unlikely to be affected by the foreseeable level of defaults. Class X and class A notes are projected to be able to withstand default rates of up to 100% and 66.3%, respectively.

Strong Recovery Expectations: The indicative portfolio contains 96.6% first-lien loans. Approximately 94.7% 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 75.8%. In determining the rating of the class X and class 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 the class X and class A notes assumed a 35.8% 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 recovery rates and increases in default rates or correlation. Fitch expects the class X, A-1 and A-2 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios were 'AAAsf' for the class X notes and ranged between 'A+sf' and 'AAAsf' for the class A-1 and A-2 notes.

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'.

DUE DILIGENCE USAGE

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

Click the link below for an analysis of the representations, warranties, and enforcement mechanisms available to investors in transaction documents for this transaction and how they compare to those of similar securities. This analysis is expected to be updated in a subsequent new issue report.

Additional information is available at www.fitchratings.com.

Sources of Information:

The sources of information used to assess these ratings were provided by the arranger (Morgan Stanley & Co. LLC) 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

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

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

Global Rating Criteria for Corporate CDOs (pub. 25 Jul 2014)

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

Global Structured Finance Rating Criteria (pub. 31 Mar 2015)

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

Related Research

GoldenTree Loan Opportunities X, Limited/LLC -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866036

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=987223

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987223

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/20150630006303/en/

Fitch Ratings
Primary Analyst
Robert Rhein
Director
+1-312-606-2314
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
John Um, CFA
Director
+1-212-908-0287
or
Committee Chairperson
Derek Miller
Senior Director
+1-312-368-2076
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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