Fitch to Rate Dryden 40 Senior Loan Fund/LLC; Issues Presale

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign the following rating to Dryden Senior Loan Fund/LLC:

--$379,000,000 class A notes 'AAAsf'; Outlook Stable

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

TRANSACTION SUMMARY

Dryden 40 Senior Loan Fund (the issuer) and Dryden 40 Senior Loan Fund LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Prudential Investment Management, Inc. Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $600 million of primarily senior secured leveraged loans. The CLO will have a five-year reinvestment period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 36.8% 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 level of CE for class A notes is slightly above the average for recent CLO issuances.

'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is slightly better than that of recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch's opinion, the class A notes are unlikely to be affected by the foreseeable level of defaults. The class A notes are robust against default rates of up to 59.4%.

Strong Recovery Expectations: The indicative portfolio consists of 96.6% senior secured loans, of which 90.4% have strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher and the base case recovery assumption is 77.1%. In determining ratings for the class A notes, Fitch stressed the indicative portfolio by assuming a higher concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stresses resulting in a 35.9% recovery rate assumption in Fitch's 'AAAsf'.

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 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:

The expected ratings are based on information provided to Fitch as of July 6, 2015. Sources of information used to assess these ratings were provided by the arranger, Wells Fargo Securities, and the public domain.

Dryden 40 Senior Loan Fund/LLC (Structured Credit)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868179

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=987484

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987484

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/20150706005721/en/

Fitch Ratings
Primary Analyst
Erika Tsang, CFA
Director
+1-212-908-0817
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Amy Drobish
Director
+1-212-908-9194
or
Committee Chairperson
Derek Miller
Senior Director
+1-312-368-2076
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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