Fitch Rates Parallel 2015-1 Ltd./LLC; Publishes New Issue Report

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings to Parallel 2015-1 Ltd./LLC:

--$3,000,000 class X notes 'AAAsf'; Outlook Stable;

--$256,000,000 class A notes 'AAAsf'; Outlook Stable.

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

TRANSACTION SUMMARY

Parallel 2015-1 Ltd. and Parallel 2015-1 LLC (together, Parallel 2015-1) comprise an arbitrage cash flow collateralized loan obligation (CLO) managed by DoubleLine Capital LP (DoubleLine). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of $400 million of primarily senior secured leveraged loans. The CLO will have an approximately 4.3-year reinvestment period and a 2.3-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 36% for class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAAsf' stress scenario. Class X notes are ultimately expected to be paid in full from the application of interest proceeds via the interest waterfall. The degree of CE available to class A notes is slightly lower than the average CE of recent CLO issuances; however, cash flow modeling indicates performance in line with other Fitch-rated 'AAAsf' CLO notes.

'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 a highly speculative credit quality, but class X and A notes are unlikely to be affected by the foreseeable level of defaults. Class X and A notes are projected to be able to withstand default rates of up to 77.2% and 60.7%, respectively.

Strong Recovery Expectations: The indicative portfolio consists of 95.9% first lien loans. Approximately 88.6% of the indicative portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher and a base case recovery assumption of 75.1%. In determining the class X and A note ratings, 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 36.9% 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 X and A 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 X notes and between 'Asf' and 'AAAsf' for the class A notes.

Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying new issue report, available at 'www.fitchratings.com' or by clicking on the link.

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:

The sources of information used to assess these ratings were provided by the arranger (Morgan Stanley & Co. LLC) and the public domain.

Parallel 2015-1 Ltd./LLC

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868296

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. 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=987672

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987672

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/20150709006087/en/

Fitch Ratings
Primary Analyst
Robert Rhein
Director
+1-312-606-2314
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Joseph Farfsing
Associate Director
+1-312-368-3346
or
Committee Chairperson
Derek Miller
Senior Director
+1-312-368-2076
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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