Bangkok--4 Dec--Moody's Asia Pacific
Approximately US$86 million of CDO securities rated
Moody's Investors Service has assigned provisional ratings to the first CDO transaction originated by Clearwater Capital Partners, LLC ("Clearwater"). The CDO portfolio consists of distressed corporate loans/high yield bonds, mostly domiciled in Asia. The proposed transaction is a cash flow CDO transaction arranged by Merrill Lynch (Singapore) Pte. Ltd. The issuer is a special purpose company incorporated in Singapore. The complete rating action is as follows:
Issuer: Clearwater Capital Partners CLO I Pte. Ltd.
US$[40.88
] million Class A Senior Secured Floating Rate Notes due [2014
], rated (P)Aaa
US$[14.60
] million Class B Senior Secured Floating Rate Notes due [2014
], rated (P)Aa2
US$[7.30
] million Class C Senior Secured Deferrable Floating Rate Notes due [2014
], rated (P)A2
US$[5.84
] million Class D Senior Secured Deferrable Floating Rate Notes due [2014
], rated (P)Baa2
US$[13.14
] million Class E Senior Secured Deferrable Floating Rate Notes due [2014
], rated (P)Ba2
US$[4.38
] million Class F Senior Secured Deferrable Floating Rate Notes due [2014
], rated (P)B3
The provisional ratings address the expected loss posed to investors by the legal final maturity in 2014. These provisional ratings reflect Moody's preliminary credit opinion regarding the transaction based on information on the underlying portfolio and the expected structure.
The final ratings are subject to finalization of the portfolio, the structure and the documentation.
In assigning the provisional ratings, Moody's considered the following factors:
1. The characteristics, credit quality and diversity of the portfolio;
2. The level of subordination for the different classes of notes;
3. The legal structure of the transaction;
4. The transaction's performance under various default scenarios and related stress tests analysis; and
5. The experience of the investment manager.
TRANSACTION SUMMARY
The transaction is a high yield cash flow CDO transaction backed by a portfolio of distressed corporate loans and high yield bonds with an expected nominal par amount of US$ [137
] million. All the underlying assets will be USD denominated and most of them are domiciled in Asia.
The issuer will issue six classes of rated notes, together with one unrated subordinated class of notes to fund the purchase of the underlying collateral. Interest on the notes will be paid quarterly. Principal repayments on the notes can occur prior to the initial redemption date depending on (i) amortization of the underlying collateral, (ii) occurrence of early redemption date, or (iii) occurrence of note acceleration after an event of default. The unrated subordinated notes to be sold at a deep discount will be held by an affiliate of the investment manager.
Part of the proceeds from the notes issuance will be used to fund the initial costs and expenses, as well as an initial reserve of an amount equal to at least two periods of senior fees, expenses and interest on the Class A and B notes. The remaining proceeds from the issuance will be used to purchase additional collateral debt obligations during the ramp-up period. The portfolio will be in the amount of US$ [127
]M at closing, and is expected to be fully ramped-up to US$ [137
]M within 90 days of closing, subject to compliance with eligibility criteria.
The income derived from the underlying collateral will be used to fund the payments under the notes. The issuer will also enter into interest rate swaps to mitigate the interest rate risks.
MOODY'S ANALYSIS
Moody's uses a cash-flow model and analyses the structure's cash flow according to various assumptions and scenarios. Moody's quantitative analysis of this transaction is based on the Double Binomial Expansion
Technique.
A more detailed analysis of the transaction is available at Moody's web site in the Pre-sale Reports section.
THE COMPANIES
The issuer, Clearwater Capital Partners CLO I Pte. Ltd., is a special purpose company newly incorporated in Singapore established solely for the purpose of entering into the current transaction. The proposed transaction is originated by Clearwater, a private equity firm incorporated in Delaware focusing on distressed or restructured loans and securities in ex-Japan Asia. Clearwater will also act as the investment manager responsible for certain administrative and investment advisory functions relating to the underlying assets and any interest rate swap transactions.
Moody's rating addresses only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have significant effect on yield to investors.
Moody's issues provisional ratings in advance of the final sale of securities and the ratings reflect Moody's preliminary credit opinion regarding the transaction. Upon a conclusive review of the final versions of all the documents and legal opinions, Moody's will endeavour to assign definitive ratings to the transaction. A definitive rating may differ from a provisional rating.
Moody's Investors Service is a publisher of rating opinions and research. It is not involved in the offering or sale of any securities, nor is it acting on behalf of the offering party. This release is not a solicitation or a recommendation to buy, hold or sell securities.
Hong Kong
Min Ye
Managing Director
Structured Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121
Hong Kong
Helen Y. Lam
Analyst
Structured Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121