Fitch Expects to Rate Maranon Loan Funding 2015-1, Ltd./LLC; Issues Presale

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign the following ratings to Maranon Loan Funding 2015-1, Ltd./LLC

--$94,000,000 class A-1 notes 'AAA(EXP)sf'; Outlook Stable;

--$99,100,000 class A-2 notes 'AAA(EXP)sf'; Outlook Stable.

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

TRANSACTION SUMMARY

Maranon Loan Funding 2015-1, Ltd. (the issuer) and Maranon Loan Funding 2015-1, LLC (the co-issuer) together comprise a middle-market (MM) collateralized loan obligation (CLO) that will be managed by Maranon Capital, L.P. Net proceeds from the issuance of the secured notes and subordinated notes will be used to purchase a portfolio of approximately $350 million primarily senior secured MM 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 44.8% for class A-1 and class A-2 notes (together, the class A notes), in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The CE is significantly higher than the levels typically seen for CLOs backed by broadly syndicated loans and higher than levels seen on recent Fitch-rated MM CLOs.

'B/B-' Asset Quality: Fitch expects the credit quality of the underlying obligors to primarily fall in the 'B/B-' range. Fitch's base case analysis centered on a portfolio with a weighted average rating factor (WARF) of 38, in accordance with the initial expected matrix point. The analysis on such portfolio, in addition to analysis on the other permitted matrix points, indicated the class A notes demonstrate cash flow performance in line with other Fitch-rated 'AAAsf' CLO notes. In the base case analysis class A notes are projected to be able to withstand default rates of up to 73.6%.

Strong Recovery Expectations: The transaction documents require a minimum of 95% of the portfolio to be invested in senior secured loans, cash and eligible investments. Portfolio management is also governed by a Fitch weighted average recovery rate (WARR) test. In its base case analysis of the class A notes, Fitch modified the WARR of the portfolio to reach the base case trigger of 69%, and further reduced recovery assumptions for higher rating stress scenarios. The base case analysis of the class A notes assumed a 34.9% 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-1 and A-2 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 and class A-2 notes.

DUE DILIGENCE USAGE

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

The publication of a RW&Es appendix is not required for this transaction.

Additional information is available at www.fitchratings.com.

Sources of Information:

Sources of information used to assess these ratings were provided by the arranger, Citigroup Global Markets, Inc. and the public domain.

Maranon Loan Funding 2015-1, Ltd./LLC

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=876165

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. 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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997446

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997446

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/20151230005569/en/

Fitch Ratings
Primary Analyst
Erika Tsang, CFA, +1-212-908-0817
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Graham DeOrsay, +1-212-908-0662
Analyst
or
Committee Chairperson
Derek Miller, +1-312-368-2076
Senior Director
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526 (New York)
[email protected]
or
Hannah James, + 1 646-582-4947 (New York)
[email protected]

Source: Fitch Ratings

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