Fitch Rates ICG US CLO 2016-1, Ltd./LLC

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned the following rating and Rating Outlook to ICG US CLO 2016-1, Ltd./LLC:

--$256,000,000 Class A-1 Notes 'AAAsf'; Outlook Stable.

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

TRANSACTION SUMMARY

ICG US CLO 2016-1, Ltd. (issuer) and ICG US CLO 2016-1, LLC (co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by ICG Debt Advisors LLC. Net proceeds from the issuance of the notes will be used to purchase assets to reach a target portfolio of approximately $400 million of primarily senior secured loans. The CLO will have an approximately four-year reinvestment period and two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 36.0% for the class A-1 notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAAsf' scenario. The degree of CE available to the class A-1 notes is in line with the average CE of recent CLO issuances.

'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is in line with that of recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, in Fitch Ratings' opinion, the class A-1 notes are unlikely to be affected by the foreseeable level of defaults. Class A-1 notes are projected to be able to withstand default rates of up to 59.3%.

Strong Recovery Expectations: The indicative portfolio consists of 97.5% first lien senior secured loans. Approximately 92.1% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, and the base case recovery assumption is 78.8%. In determining the class A-1 note rating, 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 stresses, resulting in a 37.6% 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-1 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'A-sf' and 'AAAsf' for the class A-1 notes.

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

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool was not prepared for this transaction. Offering documents for U.S. CLO transactions do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. Therefore, Fitch credit reports for U.S. CLO transactions will not typically include descriptions of RW&Es. For further information, please see Fitch's Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.

Additional information is available at www.fitchratings.com.

Sources of Information:

The sources of information used to assess these ratings were the arranger (Citigroup Global Markets Inc.) and the public domain.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/site/re/884963

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 17 May 2016)

https://www.fitchratings.com/site/re/879815

Global Rating Criteria for CLOs and Corporate CDOs (pub. 28 Jul 2016)

https://www.fitchratings.com/site/re/885653

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010982

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010982

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/20160830006098/en/

Fitch Ratings
Primary Analyst
Cristina Jennings, +1-312-606-2300
Associate Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Aaron Hughes, +1-312-368-2074
Director
or
Committee Chairperson
Derek Miller, +1-312-368-2076
Managing Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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