Fitch Affirms ALM XII, Ltd./LLC; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the class A-1 and class E notes issued by ALM XII, Ltd./LLC (ALM XII) at 'AAAsf' and 'B-sf', respectively. The Rating Outlooks remain Stable. A detailed list of rating actions follows at the end of this rating action commentary.

KEY RATING DRIVERS

The affirmations are based on the stable performance of the underlying portfolio, the sufficient credit enhancement (CE) available to the notes, and the cushions available in the CLO's cash flow modeling results. As of the December 2015 trustee report, all collateral quality tests, concentration limitations and coverage tests are passing, and there are no defaulted assets in the portfolio. Fitch's cash flow analysis also indicates each class of notes is passing all nine interest rate and default timing scenarios at or above their current rating levels with cushions.

The loan portfolio par amount plus principal cash is approximately $774.6 million, compared to the target par balance of $770 million at closing in February 2015, resulting in a marginal increase in the CE levels. The weighted average spread (WAS) of the portfolio is 4.6%, versus a minimum WAS trigger of 3.7%, as reported by the trustee. The portfolio, excluding cash, is invested in 95.7% senior secured loans and 4.3% second lien loans, with approximately 90.4% of the portfolio having either strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.

The Stable Outlook for each class reflects the expectation that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio.

RATING SENSITIVITIES

The ratings of the notes may be sensitive to the following: asset defaults, significant negative credit migration, lower than historically observed recoveries for defaulted assets, and breaches of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of ALM XII, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities. Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on Feb. 26, 2015.

ALM XII is an arbitrage cash flow collateralized loan obligation (CLO) that is managed by Apollo Credit Management (CLO), LLC. The transaction remains in its reinvestment period, which is scheduled to end in April 2019.

This review was conducted under the framework described in the report 'Global Rating Criteria for CLOs and Corporate CDOs' using Fitch's Portfolio Credit Model (PCM) to project future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various combinations of default timing and interest rate stress scenarios, as described in the report. The cash flow model was customized to reflect the transaction's structural features.

DUE DILIGENCE USAGE

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

Fitch has affirmed the following ratings:

-- $492,750,000 class A-1 notes at 'AAAsf'; Outlook Stable;

-- $11,500,000 class E notes at 'B-sf'; Outlook Stable.

Fitch does not rate the class A-2a, A-2b B, C-1, C-2, D, and subordinated notes.

Additional information is available at www.fitchratings.com.

Sources of Information:

The sources of information used to assess these ratings were periodic trustee reports 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

Global Rating Criteria for CLOs and Corporate CDOs (pub. 12 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873664

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Related Research

ALM XII, Ltd./LLC -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863060

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998062

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998062

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/20160119006587/en/

Fitch Ratings
Surveillance Analyst
Felix Chen
Associate Director
+1-212-908-9154
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1-312-368-2184
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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