Fitch Rates Galaxy XX CLO, Ltd. /LLC

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings to Galaxy XX CLO, Ltd./LLC:

--$352,000,000 class A notes 'AAAsf'; Outlook Stable.

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

Transaction Summary

Galaxy XX CLO, Ltd. (the issuer) and Galaxy XX CLO, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by PineBridge Investments LLC (PineBridge). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $550 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 36.0% for the class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in an 'AAAsf' stress scenario. The degree of CE available to the class A notes is lower than the average CE of recent CLO issuances; however, cash flow modeling indicates performance in line with other 'AAAsf' CLO notes.

'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/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 notes are unlikely to be affected by the foreseeable level of defaults. Class A notes are projected to be able to withstand default rates of up to 58.5%.

Strong Recovery Expectations: The indicative portfolio consists of 95.7% first-lien loans. Approximately 85.7% 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 76.4%. In determining the class A 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 36.7% 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 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 notes.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be 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.

Click the link below for an analysis of the representations, warranties, and enforcement mechanisms available to investors in transaction documents for this transaction and how they compare to those of similar securities. This analysis is expected to be updated in a subsequent new issue report.

Additional information is available at www.fitchratings.com.

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

Sources of Information:

The expected ratings are based on information provided to Fitch as of June 19, 2015. Sources of information used to assess these ratings were provided by the arranger (BNP Paribas Securities Corp.) and the public domain. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.

CIFC Funding 2015-III, Ltd./LLC

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 Corporate CDOs (pub. 25 Jul 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Global Structured Finance Rating Criteria (pub. 31 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

Related Research

Galaxy XX CLO, Ltd./LLC -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866150

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=987013

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987013

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/20150625006407/en/

Fitch Ratings
Primary Analyst
Aaron Hughes
Director
+1-312-368-2074
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Trevor Lee
Associate Director
+1-212-908-0881
or
Committee Chairperson
Alina Pak
Senior Director
+1-312-368-3184
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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