Fitch to Rate ACAS CLO 2015-2, Ltd./LLC; Issues Presale Report

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign the following ratings to ACAS CLO 2015-2, Ltd./LLC:

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

--$100,000,000 class A loans 'AAAsf'; Outlook Stable.

Fitch does not expect to rate the class B, C, D, E or the subordinated notes.

TRANSACTION SUMMARY

ACAS CLO 2015-2, Ltd. (the issuer) and ACAS CLO 2015-2, LLC (the co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by American Capital CLO Management, LLC (ACCLOM). Net proceeds from the issuance of the secured debt and subordinated notes will be used to purchase a portfolio of approximately $500 million of primarily senior secured leveraged loans. The CLO will have an approximately four-year reinvestment period and a two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 35% for the class A notes and class A loans (collectively, class A debt), in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAAsf' stress scenario. The degree of CE available to the class A debt is lower than the average CE of recent CLO issuances; however, cash flow modeling indicates performance in line with other 'AAAsf' CLO notes.

'B' Asset Quality: The average credit quality of the indicative portfolio is approximately '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 A debt is unlikely to be affected by the foreseeable level of defaults. Class A debt is projected to be able to withstand default rates of up to 60.5%.

Strong Recovery Expectations: The indicative portfolio consists of 97.3% first lien senior secured loans. Approximately 92.6% 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 77.3%. In determining the class A debt ratings, 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 A debt assumed a 36.2% 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 A notes and class A loans to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'Asf' and 'AAAsf' for the class A notes and class A loans.

Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying presale report, available at 'www.fitchratings.com' or by clicking on the link.

DUE DILIGENCE USAGE

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

The publication of a Representations, Warranties and Enforcement Mechanisms appendix is not required for this transaction.

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 (Wells Fargo Securities, LLC) and the public domain.

ACAS CLO 2015-2, Ltd./LLC (US Structured Credit)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868959

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 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 Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988796

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988796

Endorsement Policyhttps://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/20150730006664/en/

Fitch Ratings
Primary Analyst:
John Um, CFA, +1-212-908-0287
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Robert Rhein, +1-312-606-2314
Director
or
Committee Chairperson:
Derek Miller, +1-312-368-2076
Senior Director
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
New York
[email protected]

Source: Fitch Ratings

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