Fitch Rates LCM XII Limited Partnership/LLC Refinancing Notes

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a rating of 'AAAsf' to the new LCM XII Limited Partnership/LLC (LCM XII) class A-R refinancing notes.

KEY RATING DRIVERS

Fitch has been notified of the proposed Second Supplemental Indenture that would cause a refinancing of outstanding notes and amend certain terms and definitions of the indenture.

On June 11, 2015, LCM XII issued refinancing notes as class A-R, B-R, C-R, and D-R notes and applied the net issuance and sales proceeds thereof to redeem the existing class A, B, C and D notes at par (plus accrued interest), respectively. Each class of refinancing notes was issued in the same amount and has the same terms as the corresponding class of original notes, except that the spread on each refinanced class was reduced. The class E notes and LP Certificates will not be refinanced. The new refinancing notes are restricted from being refinanced again in the future.

The amendment also added provisions to address compliance with the Volcker Rule, prohibiting bonds, senior secured notes and other non-loan assets from the portfolio unless a Volcker Rule Consent Event occurs. The maximum limitation for cov-lite loans increased to 60% from 40% of the portfolio, and maturity amendments on underlying assets now require the satisfaction of the weighted average life test during the reinvestment period or a minimum repayment of 10% of the principal balance of the asset being amended. The amended collateral obligation is also restricted from becoming a long-dated asset at any time.

The overall reduction in the cost of the liabilities is viewed as a credit positive and no other material changes were made to the capital structure or underlying portfolio as a result of the refinancing. The collateral portfolio continues to display stable performance since the last review on May 1, 2015. The credit enhancement remains the same on the refinancing notes. As a result, cash flow model analysis was not conducted for this review. Fitch has determined that the ratings on the refinancing notes shall be assigned at the same rating level as the original notes.

RATING SENSITIVITIES

The ratings of the notes may be sensitive to the following: asset defaults, portfolio migration, including assets being downgraded to 'CCC', portions of the portfolio being placed on Rating Watch Negative, overcollateralization (OC) or interest coverage (IC) test breaches, or breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the closing date of LCM 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 Oct. 30, 2012. Fitch believes that the changed provisions from the Second Supplemental Indenture will have no impact on the ratings of the refinancing notes.

A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for that asset class is also available by accessing the reports and links indicated below.

LCM XII is an arbitrage, cash flow collateralized loan obligation (CLO) that closed on Oct. 4, 2012 and is managed by LCM Asset Management LLC.

DUE DILIGENCE USAGE

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

Fitch has assigned the following ratings:

--$321,250,000 class A senior floating rate notes 'PIF';

--$321,250,000 class A-R senior floating rate notes 'AAAsf'; Outlook Stable.

Fitch does not rate the class B-R, class C-R, class D-R, class E or the LP Certificates.

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 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

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=986266

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/20150611006318/en/

Fitch Ratings
Primary Surveillance Analyst:
Christine Choo, +1-212-908-0603
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
[email protected]

Source: Fitch Ratings

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