Fitch Expects to Rate Venture XXII CLO, Limited/LLC; Issues Presale

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings expects to assign the following ratings and Rating Outlooks to Venture XXII CLO, Limited/LLC:

--$222,000,000 class A-1L notes 'AAA(EXP)sf'; Outlook Stable;

--$15,000,000 class A-1F notes 'AAA(EXP)sf'; Outlook Stable;

--$20,000,000 class A-2 notes 'AAA(EXP)sf'; Outlook Stable.

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

TRANSACTION SUMMARY

Venture XXII CLO, Limited (the issuer) and Venture XXII CLO, LLC (the co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by MJX Venture Management LLC. Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $400 million of primarily senior secured leveraged loans. The CLO will have an approximately four-year reinvestment period and a two-year non-call period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 40.8% for the class A-1L and A-1F notes (collectively, the class A-1 notes) and 35.8% for class A-2 notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE available to class A-1 notes is above the average for recent CLO issuances and the level of CE available to class A-2 notes is in line with the average for recent CLO issuances.

'B' Asset Quality: The average credit quality of the indicative portfolio is 'B', which is in line with that of recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch's opinion, class A-1 and A-2 notes are unlikely to be affected by the foreseeable level of defaults. Class A-1 and A-2 notes are robust against default rates of up to 68.3% and 61.4%, respectively.

Strong Recovery Expectations: The indicative portfolio consists of 98.8% first lien senior secured loans. Approximately 95.2% 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 ratings for class A-1 and A-2 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, resulting in a 36% recovery rate assumption 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-1L and A-1F (collectively, the class A-1 notes) and A-2 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'AA-sf' and 'AAAsf' for the class A-1 notes, and between 'A+sf' and 'AAAsf' for the class A-2 notes.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report, which is 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.

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:

Sources of information used to assess these ratings were provided by the arranger, Jefferies LLC, and the public domain.

Venture XXII CLO, Limited/LLChttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875708

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 Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997345

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997345

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/20151223005718/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
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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