Research: Rating Action: Moody’s raises the ratings of five classes of notes issued by Apidos CLO XXVII

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$147.5 million in tickets affected

New York, August 05, 2022 — Moody’s Investors Service, Inc. (“Moody’s”) has raised the ratings of the following notes issued by Apidos CLO XXVII:

$57,500,000 of Class A-2R senior secured floating rate notes due 2030 (the “Class A-2R Notes”), upgraded to Aa1 (sf); Previously on June 15, 2021 Awarded Aa2 (sf)

$28,750,000 BR Class Mezzanine Secured Deferred Floating Rate Notes due 2030 (the “BR Class Notes”), upgraded to Aa3 (sf); previously on June 15, 2021 Assigned A2 (sf)

$31,250,000 of Class CR Mezzanine Secured Deferred Floating Rate Notes due 2030 (the “Class CR Notes”), upgraded to Baa1 (sf); Previously on June 15, 2021 Awarded Baa3 (sf)

$22,500,000 Class D Deferred Floating Rate Notes due 2030 (the “Class D Notes”), upgraded to Ba2 (sf); previously on July 27, 2017 Final rating awarded Ba3 (sf)

$7,500,000 Junior Class E Deferred Floating Rate Notes due 2030 (the “Class E Notes”), upgraded to B2 (sf); previously on July 27, 2017 Final rating assigned B3 (sf)

Apidos CLO XXVII, originally issued in July 2017 and partially refinanced in June 2021, is a cash-managed CLO. The Notes are secured primarily by a portfolio of highly syndicated senior secured corporate loans. The reinvestment period of the transaction ended in July 2022.

RATINGS RATIONALE

These rating actions primarily reflect earnings from the end of the operation’s reinvestment period in July 2022. In light of reinvestment restrictions during the amortization period that limit the manager’s ability to make meaningful changes to the pool current collateral pool, Moody’s has analyzed the transaction assuming it is more likely that the characteristics of the collateral pool will be maintained and will continue to meet certain covenant requirements. In particular, Moody’s has assumed that the transaction will benefit from a lower weighted average rating factor (WARF) and a higher spread to the respective covenant levels. Moody’s has modeled a WARF of 2708 and a weighted average spread (WAS) of 3.39% against its current respective covenant levels of 2945 and 3.20%.

Additionally, the overcollateralization (OC) ratios of rated notes have improved since August 2021. Based on the July 2022 Trustee Report [1]the OC ratios for Class A/B, Class C and Class D notes are respectively 130.66%, 121.41%, 112.74% and 107.23% compared to August 2021 [2] levels of 129.65%, 120.47%, 111.87% and 106.39%, respectively.

Moody’s modeled the transaction using a cash flow model based on the binomial expansion technique, as described in “Moody’s Global Approach to Rating Collateralized Loan Obligations”.

Key model inputs used by Moody’s in its analysis, such as face value, weighted average rating factor, diversity score, weighted average spread, and weighted average recovery rate, are based on its published methodology and may differ from the figures communicated by the administrator. For modeling purposes, Moody’s used the following basic assumptions:

Balance of proceeds at par and principal: $492,898,458

Default: $751,300

Diversity score: 87

Weighted Average Rating Factor (WARF): 2708

Weighted average spread (WAS) (before taking into account benchmark rate floors): 3.39%

Weighted average recovery rate (WARR): 47.55%

Weighted Average Life (WAL): 4.34 years

Methodology used for the rating action

The main methodology used in these ratings is “Moody’s Global Approach to Rating Collateralized Loan Obligations” published in December 2021 and available on https://ratings.moodys.com/api/rmc-documents/74832. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Factors that would cause ratings to be upgraded or downgraded:

The performance of the Notes rated is subject to uncertainty. The performance of rated notes is sensitive to the performance of the underlying portfolio, which in turn depends on changing economic and credit conditions.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

The analysis relies on an assessment of the characteristics of the collateral to determine the distribution of collateral losses, ie the function correlated to an assumption about the probability of occurrence of each level of possible collateral losses. Secondly, Moody’s assesses each possible collateral loss scenario using a model that reproduces the relevant structural characteristics to deduce the payouts and therefore the ultimate potential losses for each rated instrument. The loss incurred by a rated instrument in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody’s quantitative analysis involves an evaluation of scenarios that focus on factors contributing to rating sensitivity and consider the likelihood of material collateral losses or impaired cash flows. Moody’s weights the impact on rated instruments based on its assumptions of the likelihood of events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following information, if applicable to the jurisdiction: Ancillary services, Information to be provided to the rated entity, Information to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

REFERENCES/QUOTES

[1] Syndic’s report 06-July-2022

[2] Syndic’s report 05-Aug-2021

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Diana Situ
Assistant Vice President – Analyst
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

David Ham
VP – Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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