KBRA Assigns Preliminary Ratings to the Reset Notes of RRE 5 Loan Management DAC

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Kroll Bond Rating Agency UK Limited (KBRA) assigns preliminary ratings to five classes of notes issued by RRE 5 Loan Management DAC, a cash flow collateralised loan obligation (CLO) backed primarily by a diversified portfolio of Euro-denominated corporate loans.

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Friday, November 12, 2021
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Banking, Professional Services, Finance, Jetivia SA v Bilta (UK) Limited (in liquidation), European Securities and Markets Authority, RRE, Insurance commissioner, European, Saint Augustine House, Class, U.S. Securities and Exchange Commission, Prospectus, LLP, Ontario Securities Commission, European Union, RRAM, Union, National Association, COVID-19, Bond, LLC, National Association of Insurance Commissioners, ESG, CRA, CLO, KBRA, Credit, Clos, Security (finance), Risk management
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United Kingdom, Europe, APOLLO, LONDON, UK
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KBRA UK
Summary
Key Points: 
  • Kroll Bond Rating Agency UK Limited (KBRA) assigns preliminary ratings to five classes of notes issued by RRE 5 Loan Management DAC, a cash flow collateralised loan obligation (CLO) backed primarily by a diversified portfolio of Euro-denominated corporate loans.
  • RRE 5 Loan Management DAC is managed by Redding Ridge Asset Management (UK) LLP (RRAM UK or the collateral manager).
  • Proceeds from the issuance of the new CLO notes will be used to redeem the outstanding notes in full and to purchase new assets (150 million upsize).
  • The collateral in RRE 5 Loan Management DAC will mainly consist of broadly syndicated leveraged loans and bonds issued by corporate obligors diversified across sectors.


Kroll Bond Rating Agency UK Limited (KBRA) assigns preliminary ratings to five classes of notes issued by RRE 5 Loan Management DAC, a cash flow collateralised loan obligation (CLO) backed primarily by a diversified portfolio of Euro-denominated corporate loans.

RRE 5 Loan Management DAC is managed by Redding Ridge Asset Management (UK) LLP (“RRAM UK” or the “collateral manager”). The CLO originally closed in October 2020. This transaction will reset the terms of the CLO, including the stated maturity, non-call period, reinvestment period, note interest rates and notional balances. Proceeds from the issuance of the new CLO notes will be used to redeem the outstanding notes in full and to purchase new assets (€150 million upsize). The CLO will have a 4.6-year reinvestment period and a 15.1-year legal final. The ratings reflect initial credit enhancement levels, coverage tests including par value and interest coverage tests, excess spread, and a reinvestment overcollateralisation test.

The collateral in RRE 5 Loan Management DAC will mainly consist of broadly syndicated leveraged loans and bonds issued by corporate obligors diversified across sectors. The target portfolio par amount is €550.0 million with exposures to 176 obligors. The obligors in the portfolio have a K-WARF of 2458, which represents a weighted average portfolio assessment of approximately B. KBRA has also considered the potential for near to medium term negative portfolio credit deterioration and the transactions sensitivity to macroeconomic shocks like that seen during the COVID-19 pandemic.

RRAM UK is a UK-based subsidiary of Redding Ridge Asset Management LLC, an independent asset management company established and seeded by Apollo Global Credit Management, LLC (Apollo) in 2016 to manage CLOs. RRAM UK manages eight European CLOs as of November 2021. This is the eleventh RRAM UK CLO to be rated by KBRA.

The ratings on the Class A-1-R and A-2-R Notes consider the timely payment of interest and ultimate payment of principal by the applicable stated maturity date, while its ratings on the Class B-R, C-R, and D-R Notes consider the ultimate payment of interest and principal by the applicable stated maturity date. Upon the successful execution of the refinancing, KBRA expects to withdraw the ratings of the original notes that are being refinanced provided they are paid in full as expected.

In performing the rating analysis, KBRA utilized its Structured Credit Global Rating Methodology, the Global Structured Finance Counterparty and the ESG Global Rating Methodology.

Click here to view the report. To access ratings and relevant documents, click here.

Disclosures

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 Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union. Information on a credit rating’s endorsement status is available on its rating page at KBRA.com.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA UK

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. 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. Kroll Bond Rating Agency UK is located at Augustine House, Austin Friars, London, EC2N 2HA, United Kingdom.

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