Fitch to Rate Neuberger Berman CLO XX, Ltd./LLC; Issues Presale

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign the following ratings to Neuberger Berman CLO XX, Ltd./LLC:

--$3,000,000 class X notes 'AAA(EXP)sf'; Outlook Stable;--$317,500,000 class A notes 'AAA(EXP)sf'; Outlook Stable.

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

TRANSACTION SUMMARY

Neuberger Berman CLO XX, Ltd. (the issuer) and Neuberger Berman CLO XX, LLC (the co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Neuberger Berman Fixed Income LLC (Neuberger Berman). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $500 million of primarily senior secured leveraged loans. The CLO will have an approximately four-year reinvestment period and a two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 36.5% for 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 class A notes is in line with the average CE of recent CLO issuances. Class X notes are ultimately expected to be paid in full from the application of interest proceeds via the interest waterfall.

'B' Asset Quality: The average credit quality of the indicative portfolio is '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 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 92.2% and 60.0% respectively.

Strong Recovery Expectations: The indicative portfolio consists of 95.0% first lien senior secured loans. Approximately 84.3% 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 74.0%. 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 SENSITIVITIESFitch 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 'Asf' and 'AAAsf'. The class X notes passed at the 'AAAsf' rating level in all sensitivity scenarios tested.

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 USAGENo 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, Morgan Stanley & Co. LLC and the public domain. The expected ratings are based on information provided to Fitch as of Oct. 29, 2015.Neuberger Berman CLO XX, Ltd./LLChttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873096

Applicable CriteriaCounterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158Criteria 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=838868Global Rating Criteria for CLOs and Corporate CDOs (pub. 30 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868908Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Additional DisclosuresDodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=993142Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=993142Endorsement 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/20151029006822/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
Derek Miller
Senior Director
+1-312-368-2076
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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