Fitch to Rate Dryden 43 Senior Loan Fund /LLC; Issues Presale
July 27 2016 - 01:05PM
Business Wire
Fitch Ratings expects to assign the following ratings and Rating
Outlooks to Dryden 43 Senior Loan Fund /LLC:
--$381,000,000 class A notes 'AAAsf', Outlook Stable;
--$4,800,000 class X notes 'AAAsf', Outlook Stable.
Fitch does not expect to rate the class B, C, D, E or
subordinated notes.
TRANSACTION SUMMARY
Dryden 43 Senior Loan Fund (the issuer) and Dryden 43 Senior
Loan Fund LLC (the co-issuer) comprise an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by PGIM,
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 an approximately five-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
the 'AAAsf' stress scenario. The degree of CE available to the
class A notes is in line with the average CE of recent CLO
issuances, and cash flow modeling results indicate performance in
line with other Fitch-rated 'AAAsf' CLO notes. Class X notes are
expected to be paid in full from the application of interest
proceeds in accordance with a payment schedule over the first 23
payment dates.
'B+/B' Asset Quality: The average credit quality of the
indicative portfolio is 'B+/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 A
and X notes are unlikely to be affected by the foreseeable level of
defaults. Class A and X notes are robust against default rates of
up to 59.7% and 95.7%, respectively.
Strong Recovery Expectations: The indicative portfolio consists
of 96% first lien senior secured loans. Approximately 90% 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 79.2%. In determining the class A and X
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 38.2% recovery rate assumption in
Fitch's 'AAAsf' scenario.
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, with results under these
sensitivity scenarios ranging between 'A-sf' and 'AAAsf'. The class
X notes are expected to remain 'AAAsf' under even the most extreme
sensitivity scenarios.
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:
Sources of information used to assess this rating were provided
by the arranger (Deutsche Bank Securities Inc.) and the public
domain.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds
(pub. 18 Jul 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963
Criteria for Interest Rate Stresses in Structured Finance
Transactions and Covered Bonds (pub. 17 May 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879815
Global Rating Criteria for CLOs and Corporate CDOs (pub. 09 Jun
2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882840
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130
Related Research
Dryden 43 Senior Loan Fund/LLC
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885702
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009553
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009553
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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Fitch RatingsPrimary AnalystAmy
DrobishDirector+1-212-908-9194Fitch Ratings, Inc.33 Whitehall
StreetNew York, NY 10004orSecondary AnalystErika Tsang,
CFADirector+1-212-908-0817orCommittee ChairpersonAlina Pak,
CFASenior Director+1-312-368-3184orMedia Relations:Sandro Scenga,
+1 212-908-0278sandro.scenga@fitchratings.com