Fitch assigns ‘AAAsf’ to Neuberger Berman’s $500 million CLO 65

Photo: Fitch Ratings

BAKU, Azerbaijan, October 13. Fitch Ratings has assigned ratings and Rating Outlooks to Neuberger Berman Loan Advisers CLO 65, Ltd., a $500 million collateralized loan obligation to be managed by Neuberger Berman Loan Advisers IV LLC.

According to the recent commentary by Fitch, the transaction is an arbitrage cash flow CLO, with net proceeds from the secured and subordinated notes financing a portfolio of approximately $500 million of primarily first-lien senior secured leveraged loans.

Fitch assigned the top rating of ‘AAAsf’ with a Stable Outlook to the class A-2 notes. The class B notes were rated ‘AAsf’, class C-1 ‘A+sf’, class C-2 ‘Asf’, class D-1 ‘BBB+sf’, class D-2 ‘BBB-sf’, and class E ‘BB-sf’ - all with Stable Outlooks. The class A-1 and subordinated notes were not rated.

According to the report, the indicative portfolio carries an average credit quality of ‘B’, with a weighted average rating factor (WARF) of 23.83 and a weighted average recovery rate (WARR) of 73.9%. First-lien senior secured loans make up 98.93% of the portfolio, and the transaction has a five-year reinvestment period.

Fitch noted that “the notes benefit from appropriate credit enhancement and standard U.S. CLO structural features,” despite the underlying loans’ highly speculative ‘B’ category credit quality.

The largest three industries may account for up to 44.5% of the portfolio balance, while the top five obligors can represent up to 12.5%, levels Fitch said are in line with other recent CLOs.