KBRA Assigns Preliminary Ratings to Wind River 2020-1 CLO Ltd.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to five classes of notes issued by Wind River (News - Alert) 2020-1 CLO Ltd. (Wind River 2020-1), a cash flow collateralized loan obligation (CLO) back by a diversified portfolio of corporate loans.
Wind River 2020-1 is managed by First Eagle Alternative Credit, LLC (the collateral manager) and will have a five-year reinvestment period. The legal final maturity is on Oct. 15, 2033. The ratings reflect initial credit enhancement levels, excess spread, coverage tests including par value ratio and interest coverage tests, and a reinvestment diversion test.
The collateral in Wind River 2020-1 will mainly consist of broadly syndicated leveraged loans issued by corporate obligors diversified across sectors. The obligors in the portfolio have a K-WARF of 2324, which represents a weighted average portfolio assessment of approximately B. The total portfolio par amount is $400 million with expected exposures to over 150 obligors when the transaction is fully invested. The portfolio is approximately 75% ramped as of September 15, 2020 and the remainder will be acquired before the transaction's effective date. Due to the economic fallout from COVID-19, we expect pressure on overall portfolio credit quality. As such, it is likely that the portfolio's K-WARF will increase in the near-term. KBRA considered the impact of potential credit migration.
First Eagle Alternative Credit, LLC was formed when First Eagle Investment Management, LLC acquired THL Credit Advisors in February 2020. First Eagle, with the legacy THL Credit CLO platform and personnel, has $13.9 billion in CLO assets under management across 21 active US CLOs as of June 2020.
KBRA's preliminary ratings on the Class A and B notes consider timely payment of interest and ultimate payment of principal by the applicable stated maturity date. KBRA's preliminary ratings on the Class C and D-1 notes consider ultimate payment of interest and principal by the applicable stated maturity date. KBRA's preliminary rating on the Class D-2 notes considers ultimate payment of principal by the applicable stated maturity date.
KBRA analyzed the transaction using Structured Credit Global Rating Methodology published on March 13, 2020 and the Global Structured Finance Counterparty Methodology published on August 8, 2018.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.