Rating Action Commentary
ֳ to Rate Apidos CLO XXIX Reset Transaction; Publishes Presale Report
Fri 09 May, 2025 - 2:54 PM ET
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Apidos CLO XXIX
Apidos CLO XXIX (Reset) - Representation & Warranties
ֳ - New York - 09 May 2025: ֳ has assigned expected ratings and Rating Outlooks to Apidos CLO XXIX reset transaction.
Transaction Summary
Apidos CLO XXIX (the issuer) is an arbitrage cash flow collateralized loan obligation (CLO) managed by CVC Credit Partners U.S. CLO Management LLC, which originally closed in June 2018. The existing secured notes will be redeemed in full on the closing date. Net proceeds from the issuance of the secured and subordinated notes will provide financing on a portfolio of approximately $550 million of primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the indicative portfolio is 'B', which is in line with that of recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, the notes benefit from appropriate credit enhancement and standard CLO structural features.
Asset Security (Positive): The indicative portfolio consists of 97.66% first lien senior secured loans and has a weighted average recovery assumption of 73.07%. ֳ 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.
Portfolio Composition (Positive): The largest three industries may comprise up to 40% of the portfolio balance in aggregate while the top five obligors can represent up to 12.5% of the portfolio balance in aggregate. The level of diversity required by industry, obligor and geographic concentrations is in line with that of other recent CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year reinvestment period and reinvestment criteria similar to other CLOs. ֳ's analysis was based on a stressed portfolio created by adjusting the indicative portfolio to reflect permissible concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): ֳ used a customized proprietary cash flow model to replicate the principal and interest waterfalls and assess the effectiveness of various structural features of the transaction. In ֳ's stress scenarios, the rated notes can withstand default and recovery assumptions consistent with their assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less than the WAL covenant to account for structural and reinvestment conditions after the reinvestment period. In ֳ's opinion, these conditions would reduce the effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery rates and increases in default rates, could result in a downgrade. ֳ evaluated the notes' sensitivity to potential changes in such a metric. The results under these sensitivity scenarios are as severe as between 'BBB+sf' and 'AA+sf' for class A-1-R, between 'BBB+sf' and 'AA+sf' for class A-2-R, between 'BB+sf' and 'A+sf' for class B-R, between 'B+sf' and 'BBB+sf' for class C-R, between less than 'B-sf' and 'BB+sf' for class D-1-R, and between less than 'B-sf' and 'BB+sf' for class D-2-R and between less than 'B-sf' and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1-R and class A-2-R notes as these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery rates and decreases in default rates, could result in an upgrade. ֳ evaluated the notes' sensitivity to potential changes in such metrics; the minimum rating results under these sensitivity scenarios are 'AAAsf' for class B-R, 'AA+sf' for class C-R, 'A+sf' for class D-1-R, and 'A-sf' for class D-2-R and 'BBB+sf' for class E-R.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, ֳ in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities have ratings or credit opinions from ֳ and/or other nationally recognized statistical rating organizations and/or European Securities and Markets Authority registered rating agencies. ֳ has relied on the practices of the relevant groups within ֳ and/or other rating agencies to assess the asset portfolio information.
Overall, ֳ's assessment of the asset pool information relied upon for its rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by clicking the link to the Appendix. Offering documents for this market sector do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. However, the offering document for this transaction included a draft of the indenture as an appendix, which contains RW&Es related to the underlying asset pool. For further information, please see ֳ's Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
ESG Considerations
ֳ does not provide ESG relevance scores for Apidos CLO XXIX. In cases where ֳ does not provide ESG relevance scores in connection with the credit rating of a transaction, program, instrument or issuer, ֳ will disclose in the key rating drivers any ESG factor which has a significant impact on the rating on an individual basis. For more information on ֳ's ESG Relevance Scores, visit the ֳ ESG Relevance Scores page.
Additional information is available on
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
- CLO – ֳ Stressed Portfolio Model, v2.4.0 (1)
- Global CLO Cash Flow Model, v1.3.9 (1)
- Portfolio Credit Model, v2.17.1 (1)
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
| Apidos CLO XXIX | EU Endorsed, UK Endorsed |