KBRA Assigns Preliminary Ratings to CBAM 2020-12, Ltd.

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by CBAM 2020-12, Ltd. (CBAM 2020-12), a cash flow collateralized loan obligation (CLO) back by a diversified portfolio of corporate loans.

CBAM 2020-12, Ltd. is managed by CBAM Partners, LLC (the collateral manager) and will have a three-year reinvestment period. The legal final maturity is on Jul. 20, 2031. The ratings reflect initial credit enhancement levels, excess spread, coverage tests including overcollateralization ratio and interest coverage tests, and a reinvestment overcollateralization test.

The collateral in CBAM 2020-12, Ltd. will mainly consist of broadly syndicated leveraged loans issued by corporate obligors diversified across sectors. The obligors in the portfolio have a K-WARF of 2249, which represents a weighted average portfolio assessment of approximately B. The total portfolio par amount is $500 million with expected exposures to over 220 obligors when the transaction is fully invested. The portfolio is approximately 87.5% ramped as of July 15, 2020 and the remainder will be acquired before the transaction’s effective date.

Since launching in August 2016, CBAM has closed 11 CLOs, including 6 transactions with issuance over $1 billion. In 2017 alone, CBAM issued over $5 billion of new CLOs across 4 transactions. CBAM’s active reinvesting CLO portfolio totals approximately $9.84 billion.

The social and economic fallout from the novel coronavirus (COVID-19) pandemic will impact different corporate sectors to varying degrees but broadly, we expect intense pressure on certain cyclical and other non-defensive sectors, with the adverse effects broadening and deepening as the economic dislocation continues. To address this, KBRA considered several scenarios to assess the impact of potential credit migration due to COVID-19.

The preliminary ratings on the Class A and B Notes consider the timely payment of interest and ultimate payment of principal by the applicable stated maturity date, while its rating on the Class C Notes consider the ultimate payment of interest and principal.

KBRA analyzed the transaction using Structured Credit Global Rating Methodology published on March 13, 2020 and the Global Structured Finance Counterparty Methodology published on August 8, 2018.

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

Related Publications

• Coronavirus (COVID-19): KBRA U.S. BSL CLO Rating Sensitivity Analysis
• Structured Credit Global Rating Methodology

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 U.S. Information Disclosure Form located here.

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

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

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. 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 and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical Contacts
Sean Malone, CFA, Senior Director (Lead Analyst)

+1 (646) 731-2436

smalone@kbra.com

Kathy Song, CFA, Associate Director

+1 (646) 731-1209

ksong@kbra.com

George Lyons, CFA, Senior Director

+1 (646) 731-3314

glyons@kbra.com

Eric Hudson, Senior Managing Director (Rating Committee Chair)

+1 (646) 731-3320

ehudson@kbra.com

Business Development Contact
Jason Lilien, Managing Director

+1 (646) 731-2442

jlilien@kbra.com