ALME Loan Funding V B.V.

Transcription

1 Presale: ALME Loan Funding V B.V. Primary Credit Analyst: Thomas Mclaren, London ; thomas.mclaren@spglobal.com Secondary Contacts: Bjoern Schurich, Frankfurt (49) ; bjoern.schurich@spglobal.com Matthew Jones, London (44) ; matthew.jones@standardandpoors.com Table Of Contents Million Senior Secured Floating- And Fixed-Rate Notes And Participating Term Certificates Rationale Notable Features Expected Portfolio Characteristics Portfolio Profile Tests Portfolio Management Portfolio Manager Recovery Rate Assumptions Payment Priorities Overcollateralization, Interest Coverage, And Additional Reinvestment Tests Sensitivity Analyses Notes Redemption MAY 16,

2 Table Of Contents (cont.) Note-Level Events Of Default Counterparty Risk Issuer Related Criteria And Research Appendix: Other Defined Terms MAY 16,

3 Presale: ALME Loan Funding V B.V Million Senior Secured Floating- And Fixed-Rate Notes And Participating Term Certificates This presale report is based on information as of May. 13, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings As Of May 13, 2016 Class* Preliminary rating Preliminary amount (mil. ) Coupon (%) A AAA (sf) Three-month EURIBOR plus 1.45 B-1 AA (sf) Three-month EURIBOR plus 2.10 Credit enhancement (%) Scenario default rate (%) Break-even default rate (%) Cushion (%) B-2 AA (sf) C A (sf) Three-month EURIBOR plus 3.10 D BBB (sf) Three-month EURIBOR plus 4.05 E BB (sf) Three-month EURIBOR plus 6.00 F B- (sf) 8.40 Three-month EURIBOR plus 7.85 Participating Term Certificates NR N/A 0.00 N/A N/A N/A *The rating on each class of securities is preliminary as of May 13, 2016, and subject to change at any time. We expect to assign final credit ratings on the closing date, subject to a satisfactory review of the transaction documents and legal opinion, and completion of a corporate overview. The preliminary ratings assigned to the class A, B-1, and B-2 notes address timely payment of interest and ultimate payment of principal. The preliminary ratings assigned to the class C, D, E, and F notes address the ultimate payment of interest and principal. The payment frequency will switch to semi-annual and the index will switch to six-month EURIBOR when a frequency switch event occurs. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable. Supplemental Tests Class Overcollateralization (mil. ) Loss from largest industry default test (mil. ) Loss from largest obligor default test (mil. ) A B B N/A MAY 16,

4 Supplemental Tests (cont.) Class Overcollateralization (mil. ) Loss from largest industry default test (mil. ) Loss from largest obligor default test (mil. ) C N/A D N/A E N/A F N/A Portfolio Manager Portfolio manager Apollo Management International LLP No. of European CLOs managed 4 European CLO assets under management (bil. )* 1.25 *As of April 26, CLO--Collateralized loan obligation. Transaction Profile Expected closing date June 22, 2016 Expected effective date Dec. 15, 2016 Reinvestment period end date July 15, 2020 Non-call period end date July 15, 2018 Legal maturity date July 15, 2029 Total rated amount (mil. ) Total note balance (including the subordinated notes) (mil. ) Note proceeds used to purchase collateral (mil. ) Collateral Primarily broadly syndicated senior secured loans Structure type Cash flow CLO Structure purpose Arbitrage Management Actively managed Note payment frequency Quarterly, then semi-annually if a frequency switch event occurs First payment date Jan. 15, 2017 Issuer ALME Loan Funding V B.V. Arranger Barclays Bank PLC Trustee U.S. Bank National Association Custodian, account bank, and paying agent Elavon Financial Services Ltd. CLO--Collateralized loan obligation. Portfolio Information Portfolio identified as of May 13, 2016 Effective date expected portfolio Par amount (mil. ) No. of obligors Average-obligor holding (%) Largest-obligor holding (%) Smallest-obligor holding (%) Portfolio weighted-average maturity (years) MAY 16,

5 Portfolio Information (cont.) Portfolio weighted-average maturity assuming reinvestments (years) Portfolio identified as of May 13, 2016 Effective date expected portfolio Portfolio weighted-average rating B+ B+ Portfolio weighted-average spread (excluding index floors)(%) Fixed-rate assets (%) Senior secured loans (%) Rationale S&P Global Ratings has assigned preliminary credit ratings to ALME Loan Funding V B.V.'s (ALME V) class A, B-1, B-2, C, D, E, and F senior secured notes. At closing, ALME V will also issue unrated Participating Term Certificates. ALME V is a cash flow collateralized loan obligation (CLO) transaction securitizing a portfolio of primarily senior secured loans granted to speculative-grade corporates. Apollo Management International LLP will manage the transaction. Under the transaction documents, the rated notes will pay quarterly interest unless a frequency switch event occurs (see "Liquidity risk and frequency switch event"). Following this, the notes will permanently switch to semi-annual interest payments. The portfolio's reinvestment period will end approximately four years after closing, and the portfolio's maximum average maturity date will be eight years after closing. On the effective date, we understand that the portfolio will represent a well-diversified pool of corporate credits, with a fairly uniform exposure to all of the credits. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations (CDOs; see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Sept. 17, 2015). In our cash flow analysis, we have used the portfolio target par amount of million, the covenanted weighted-average spread and weighted-average coupon of 4.15% and 6.00%, and the covenanted weighted-average recovery rates at each rating level. Elavon Financial Services Ltd. will be the bank account provider and custodian. At closing, we anticipate that the participants' downgrade remedies will be in line with our current counterparty criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013). At closing, we understand that the issuer will be in line with our bankruptcy-remoteness criteria (see "Europe Asset Isolation And Special-Purpose Entity Criteria--Structured Finance," published on Sept. 13, 2013). Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our preliminary ratings are commensurate with the available credit enhancement for each class of notes. MAY 16,

6 Notable Features Liquidity risk and frequency switch event The portfolio manager can purchase an unlimited amount of assets paying semi-annually. In addition, assets that pay quarterly interest may reset their payment frequency to semi-annual at any time. We believe this exposes the transaction to liquidity risk as the notes pay interest quarterly. The liquidity risk is, in our view, mitigated by two mechanisms: An interest smoothing account, and A note payment frequency switch mechanism. We understand that at closing the transaction documents will specify a frequency switch event that, when it occurs, will cause the payment frequency of the notes to switch permanently to semi-annual. We understand that the transaction documents will also allow the portfolio manager to change the notes' payment frequency to semi-annual at any time, subject to meeting certain conditions. Purchase of non-euro-denominated assets The portfolio manager can purchase up to 30% of non-euro-denominated obligations. The issuer has the ability to enter into asset swap transactions to hedge the currency risk. These hedges can be entered into any at any point up to six months from the settlement, provided that not more 2.5% of the portfolio can be unhedged at any one time. At closing, we anticipate that the asset swap providers' downgrade remedies will be in line with our current counterparty criteria. Covenant-lite loans The portfolio manager can purchase up to 20% of covenant-lite obligations, i.e., obligations that do not: Contain any financial covenants; or Require the obligor to comply with any maintenance covenant. Where these assets have not been assigned an individual recovery rating, we will assign these assets a recovery rate in accordance with our corporate cash flow CDO criteria. Amend-to-extend offers Amend-to-extend restructuring agreements on leveraged loans result in an extension of the loans' final maturity. They also often change the margin on the loans. Under the transaction documents, the issuer can accept amend-to-extend offers, as long as: The asset's extended maturity does not fall after the notes' maturity; and The transaction passes the portfolio's documented weighted-average life test after taking the maturity extension into account. Even though we believe the extension of an asset's maturity increases the portfolio's credit risk, we believe that the MAY 16,

7 borrower's d credit profile will compensate for the extension of an asset's maturity. Corporate rescue loans The portfolio manager can purchase corporate rescue loans, which pay interest and principal on a current basis. These loans may be obligations of a debtor in possession (DIP) under U.S. bankruptcy law. The transaction documents will require DIP loans to have a public issue rating from S&P Global Ratings. The loans may also be senior secured credit facilities made to an obligor undergoing a restructuring or an insolvency process. These facilities may either: Rank pari passu with the obligor's other senior unsecured debt, as long as--upon the enforcement of a security--these facilities rank in priority to all other senior secured debt; or Achieve priority over the obligor's other senior secured obligations, otherwise through the grant of a security. For these senior secured credit facilities, the transaction documents will require a public issuer credit rating (ICR), or a credit estimate from S&P Global Ratings. As the obligor is likely to be rated 'D' or 'SD' at the time of the purchase, we treat such loans as defaulted obligations until the earlier of: The receipt of a credit estimate; or A public ICR on the restructured obligor. The transaction documents will limit the purchase of corporate rescue loans to 5% of the portfolio, with a maximum exposure to an individual borrower of 1.5%. Trading plans The portfolio manager can regroup reinvestments into a trading plan to satisfy the transaction's reinvestment guidelines, even if an individual trade does not independently satisfy the reinvestment guidelines. The transaction documents will: Limit each trading plan to 5% of the portfolio's principal amount; State that the trading plan may not extend beyond 10 business days; Permit only one trading plan at a time; and Prevent the portfolio manager from entering into future trading plans, if a previous plan affected the issuer's compliance with any of the reinvestment guidelines. Retention requirements On the closing date, the collateral manager will purchase a portion of each class of notes with a principal amount equal to or greater than 5% of the notional balance of each class of notes. Expected Portfolio Characteristics As of May 13, 2016, the issuer has identified a portfolio of million of assets, representing 82% of the target par amount. The information and results presented in tables 2 and 3 and charts 1 to 4 reflect today's identified portfolio and the expected portfolio composition on the effective date. MAY 16,

8 According to the portfolio manager, 80% of the portfolio will be purchased at closing. From that date, the portfolio manager will have a six-month ramp-up period to the effective date limit in order to invest the remaining issuance proceeds into assets and meet the target par amount of million. Table 1 Top Obligor Holdings (In Effective Date Target Portfolio) Notional amount (%) Obligor reference Industry S&P Global Ratings' credit rating Obligor Cumulative 1 Business equipment & services B Telecommunications B Telecommunications B Leisure goods/activities/movies B Business equipment & services B Business equipment & services B Business equipment & services B Chemicals & plastics B Electronics/electrical BB Industrial equipment BB Table 2 Country Distribution Effective date target portfolio Identified portfolio T&C assessment Sovereign rating Notional amount (mil. ) Notional amount (%) Notional amount (mil. ) Belgium* AAA AA Canada AAA AAA Denmark AAA AAA Finland AAA AA France* AAA AA Germany* AAA AAA Ireland AAA A Italy* AAA BBB Luxembourg AAA AAA The Netherlands* AAA AAA Norway AAA AAA Portugal* AAA BB Singapore* AAA AAA Spain AAA BBB Sweden* AAA AAA U.K.* AAA AAA U.S.* AAA AA *Unsolicited ratings. T&C--Transfer and convertibility. Notional amount (%) MAY 16,

9 Chart 1 MAY 16,

10 Chart 2 MAY 16,

11 Chart 3 Portfolio Profile Tests On the effective date, we consider that the portfolio will comprise primarily euro-denominated senior secured loans granted to broadly syndicated speculative-grade corporate borrowers. On the effective date and when reinvestments occur, the manager will have to comply with the portfolio profile limitations (see table 3). Table 3 Collateral Pool Guidelines Type of obligation Limit (percentage of collateral pool; %) Maximum single obligor of senior secured obligations (3 exceptions at 3.0%) 2.5 Maximum single obligor which is not a senior secured obligation 1.5 Maximum single obligor 3 Maximum obligors domiciled in countries or jurisdictions rated below 'A-' by Standard & Poor's 10 Maximum single industry (provided that four industries may each represent 15% and one industry group a maximum of 17.5%) 12 MAY 16,

12 Table 3 Collateral Pool Guidelines (cont.) Type of obligation Limit (percentage of collateral pool; %) Maximum participations 10 Maximum corporate rescue loan obligations 5 Maximum single corporate rescue loan obligor 1.5 Maximum rated 'CCC' or lower 7.5 Maximum current-pay obligations 5 Maximum unhedged fixed-rate collateral obligations 7 Minimum senior secured obligations 90 Minimum senior secured loans 70 Maximum unsecured, second-lien, and mezzanine loans or high yield bonds 10 Maximum non-euro obligations 30 Maximum unhedged non-euro obligations 2.5 Maximum bridge loans 3 Maximum covenant-lite loans 20 Maximum PIK obligations 5 Maximum loans whose total indebtedness is less than 175 million 5 PIK--Payment-in-kind. Portfolio Management Under the transaction documents, certain conditions will have to be satisfied upon the reinvestment of sale proceeds (see tables 4 and 5). Table 4 Summary Of Trading Conditions During Reinvestment Period Conditions to reinvest proceeds from each type of assets sold/received Overcollateralization tests New asset minimum par amount S&P Global Ratings' CDO Monitor test Portfolio profile tests Collateral quality test Discretionary, excluding class F APB is maintained or d* Credit impaired, excluding class F Not less than 100% of the principal balance of asset sold* Not required Credit d, excluding class F Not less than 100% of the principal balance of asset sold* Defaulted (including recovery on defaulted assets) N/A Not less than 100% of the principal balance of asset sold* Not required Unscheduled principal (including recoveries) Not less than 100% of the principal balance of asset sold* MAY 16,

13 Table 4 Summary Of Trading Conditions During Reinvestment Period (cont.) Conditions to reinvest proceeds from each type of assets sold/received Overcollateralization tests New asset minimum par amount S&P Global Ratings' CDO Monitor test Portfolio profile tests Collateral quality test Scheduled principal Not less than 100% of the principal balance of asset sold* *Alternatively, if the aggregate collateral balance of the portfolio is greater than or equal to the initial par balance, adjusted for amortized note balance and new issuance. Table 5 Summary Of Trading Conditions After Reinvestment Period Conditions to reinvest proceeds from each type of assets sold/received Discretionary Overcollateralization tests Reinvestment not allowed New asset minimum par amount Credit impaired Passing before and after Not less than 100% of the principal balance of assets sold Credit d Passing before and after Not less than 100% of the principal balance of assets sold Defaulted (including recovery on defaulted assets) Reinvestment not allowed Unscheduled principal Passing before and after Not less than 100% of the principal balance of assets sold Scheduled principal SDR--Scenario default rate. Reinvestment not allowed The collateral quality tests will include: Portfolio profile tests Collateral quality test The CDO monitor test; The S&P Global Ratings' minimum weighted-average recovery rate test; The minimum weighted-average spread test; and The weighted-average life test. Class SDR following reinvestment is no higher than before At any time during the reinvestment period, to determine its compliance with the S&P Global Ratings' CDO Monitor test, the portfolio manager will be allowed to change the covenanted levels for the S&P Global Ratings' minimum weighted-average recovery rate, the minimum weighted-average spread, and the minimum weighted-average fixed coupon test, as long as the transaction is passing the new covenants at the time. Yes Yes Yes Portfolio Manager The manager of this transaction is Apollo Management International LLP, a subsidiary of Apollo Global Management, LLC (AGM). As of Dec. 31, 2015, AGM employs 353 investment professionals with 60 based in London. AGM's credit business had total assets under management of approximately $121.4 billion as of Dec. 31, MAY 16,

14 ALME V is its fifth European CLO 2.0 following ALME Loan Funding IV B.V., which closed in January Recovery Rate Assumptions The weighted-average recovery rates of both the identified portfolio and the expected portfolio on the effective date are above the covenanted minimum weighted-average recovery rates in the transaction documents. Payment Priorities Under the transaction documents, the assets' interest and principal proceeds will be payable according to separate payment priorities. On each distribution date, the issuer will distribute the interest proceeds in the interest waterfall's order of priority (see table 6). Table 6 Portfolio Weighted-Average Recovery Rate (Based on The Percentage Of Par Value) Rating level Minimum weighted-average recovery rate covenant Identified portfolio recovery rate distribution (based on the percentage of par value; %) Effective date target portfolio recovery rate distribution (based on the percentage of par value; %) AAA AA A BBB BB B MAY 16,

15 Chart 4 Table 7 Interest Waterfall Priority A B C D E F G H I J K L M N Payment Taxes or statutory fees owed by the issuer and issuer profit. Trustee fees and expenses up to a cap of 250,000 plus % of the outstanding portfolio size per year. Administrative expenses up to a cap of 250,000 plus % of the outstanding portfolio size per year. Replenishment of the expense reserve account up to a cap of 250,000 plus % of the outstanding portfolio size per year. Senior management fees of 0.15% of the beginning of period collateral balance, plus any previously due but unpaid management fees. Scheduled and termination payments to the swap counterparties. The class A notes' interest. The class B notes' interest. Curing of the class A/B coverage tests. The class C notes' interest (excluding deferred interest, but including interest on deferred interest). The class C notes' deferred interest. Curing of the class C notes' coverage tests. The class D notes' interest (excluding deferred interest, but including interest on deferred interest). The class D notes' deferred interest. MAY 16,

16 Table 7 Interest Waterfall (cont.) Priority O P Q R S T U V W X Y Z AA BB CC Payment Curing of the class D notes' coverage tests. The class E notes' interest (excluding deferred interest, but including interest on deferred interest). The class E notes' deferred interest. Curing of the class E notes' coverage tests. The class F notes' interest (excluding deferred interest, but including interest on deferred interest). The class F notes' deferred interest. Curing of the class F notes' Par Value test. If the ratings are not confirmed following the effective date, under the transaction documents, to redeem the notes sequentially until we confirm the ratings. During the reinvestment period, if the transaction does not pass the reinvestment overcollateralization test, the portfolio manager may use up to 50% of the remaining interest proceeds to purchase assets; or, if the portfolio manager is unable to purchase appropriate assets, it will use any remaining interest proceeds to redeem the notes sequentially. Subordinated management fees. Remaining trustee fees and expenses. Remaining administrative expenses. Termination payments to defaulted swap counterparties. During the reinvestment period at the direction of the portfolio manager, transfer to the supplemental reserve account. Remaining interest proceeds to the subordinated notes. On each distribution date, the issuer will distribute principal proceeds in the principal waterfall's order of priority (see table 8). Table 8 Principal Waterfall Priority A B C D E F G H I J K L M N Payment Items A to H (inclusive) of the interest waterfall if it was not fully paid. Cure the class A/B coverage tests. If the class C notes are the most senior outstanding notes, pay the class C notes' interest (excluding deferred interest, but including interest on deferred interest). If the class C notes are the most senior outstanding notes, pay the class C notes' deferred interest. Curing of the class C notes' coverage tests, if not fully cured with interest proceeds. If the class D notes are the most senior outstanding notes, pay the class D notes' interest (excluding deferred interest, but including interest on deferred interest). If the class D notes are the most senior outstanding notes, pay the class D notes' deferred interest. Cure the class D notes' coverage tests, if not fully cured with interest proceeds. If the class E notes are the most senior outstanding notes, pay the class E notes' interest (excluding deferred interest, but including interest on deferred interest). If the class E notes are the most senior outstanding notes, pay the class E notes' deferred interest. Curing of the class E notes' coverage tests, if not fully cured with interest proceeds. If the class F notes are the most senior outstanding notes, payment of the class F notes' interest (excluding deferred interest, but including interest on deferred interest). If the class F notes are the most senior outstanding notes, pay the class F notes' deferred interest. After the reinvestment period, curing of the post-reinvestment par value test, if not fully cured with interest proceeds. MAY 16,

17 Table 8 Principal Waterfall (cont.) Priority O P Q R S T U Payment If we do not confirm the ratings following the effective date, under the transaction documents, to redeem the notes sequentially until we do so. If the portfolio manager is unable to purchase appropriate assets, it will use any remaining interest proceeds to redeem the notes sequentially. During the reinvestment period, reinvestments; after the reinvestment and at the discretion of the Collateral Manager, reinvestment of unscheduled principal and, as permitted, sale proceeds. After the Reinvestment Period, to redeem the notes Items X to AA of the interest waterfall, if they are not fully paid. Subordinated management fees. Remaining principal proceeds to the subordinated notes. Overcollateralization, Interest Coverage, And Additional Reinvestment Tests The transaction will benefit from overcollateralization and interest coverage tests, which, if breached, will lead to sequential redemption of the rated notes (see table 10). For the purpose of the overcollateralization tests: Defaulted assets (for the first three years after default) and deferring assets will be carried at the lower of their recovery rate or market value; Assets rated 'CCC+' or lower above 7.5% of the outstanding portfolio size will be carried at their market value; and Senior secured assets that were purchased below 80% and that trade below 90%, and non senior secured assets that were purchased below 75% and that trade below 85%, will be carried at their purchase prices. Table 9 Overcollateralization, Interest Coverage, And Interest Reinvestment Tests Class Minimum O/C required (%) Minimum I/C required (%) A/B C D E F N/A Reinvestment O/C test N/A O/C--Overcollateralization. I/C- Interest coverage. N/A--Not applicable. Sensitivity Analyses Recovery rate sensitivity In addition to our base-case analysis, we took into account additional scenarios in which we made positive and negative adjustments (10% each) to the portfolio's covenanted average recovery rates (see table 11). MAY 16,

18 Table 10 Recovery Rate Sensitivity Resulting rating transition BDR cushion at indicated rating (%) Class Rating level 10% recovery decrease Current 10% recovery decrease A AAA AA B-1 AA AA B-2 AA AA C A A D BBB BBB E BB B F B- CCC BDR--Break-even default rate. Correlation sensitivity In addition to our base-case analysis, we assessed the notes' ratings sensitivity to different correlation assumptions by adjusting the intra- and inter-industry correlations (see tables 12 and 13). Table 11 Correlation Sensitivity Correlation Scenario Within industry (%) Between industries (%) Below base-case 15 5 Base-case equals rating Above base-case Table 12 Correlation Sensitivity Resulting rating transition BDR cushion at indicated rating (%) Class Base-case Above base-case Base-case Above base-case A AAA AA B-1 AA AA B-2 AA AA C A A D BBB BBB E BB BB F B- B BDR--Break-even default rate. Notes Redemption Final redemption Unless previously redeemed, or purchased and cancelled, each rated class of notes will redeem on the maturity date at MAY 16,

19 their outstanding principal amount. Full redemption at the subordinated noteholders' option All the rated notes may redeem at the same time at the option of the subordinated noteholders either: Only after the non-call period, or At any time if, as a result of a change in tax law, tax levied on interest payments from the portfolio's assets exceeds 6% in aggregate. The notes will redeem at their outstanding principal amount from the portfolio's sale proceeds. Refinancing of a class or classes of notes at the portfolio manager or subordinated noteholders' option Only after the non-call period can an entire class of notes be refinanced at the portfolio manager's or the subordinated noteholders' option. The refinanced class will redeem at its outstanding principal amount from the refinanced notes' issuance proceeds. Portfolio manager clean-up call After the non-call period, all of the rated notes may redeem at the same time at the portfolio manager's option if the outstanding portfolio's size is below million. The notes will redeem at their outstanding principal amount from the portfolio's sale proceeds. Redemption following a note tax event The most senior outstanding class of notes, or the subordinated noteholders, may vote to simultaneously redeem all of the notes (if the issuer is unable to change its residency): If a change in tax law makes interest or principal payments on any class of notes subject to withholding tax; If the U.K. or U.S. tax authorities impose a tax on the issuer; or The issuer becomes liable to taxes in The Netherlands in excess of 125,000 per annum. Note-Level Events Of Default The following events of default may lead to the acceleration of payments to the rated notes: The issuer fails to pay interest on the class A or B notes when due and payable. The issuer fails to pay any principal when due and payable on any class of notes. The issuer fails on any payment date to disburse any amounts available in the payment account, principal account, interest account, or expense reserve account according to the waterfalls, and this failure continues for five days. After the effective date, the ratio of the aggregate portfolio size (with defaulted assets carried at their market value) over the class A notes outstanding principal amount falls below [102.5%]. The issuer does not comply with any of its material covenants or warranties under the transaction documents, or any of its documented representations or warranties cease to be correct. The trustee will determine the materiality. Proceedings are initiated against the issuer under any insolvency law, or a receiver is appointed. It becomes unlawful for the issuer to perform its obligations under the notes. The issuer or any of the collateral becomes required to register as an investment company under the Investment Company Act, and this requirement continues for 45 days. MAY 16,

20 Counterparty Risk Elavon Financial Services Ltd. will be the bank account provider and custodian. The issuer will enter into asset swaps to hedge the foreign exchange risk arising from non-euro-denominated assets. At closing, we anticipate that the participants' downgrade remedies will be in line with our current counterparty criteria. Issuer At closing, we understand that the issuer will be bankruptcy-remote under our European legal criteria. Related Criteria And Research Related criteria Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs, Sept. 17, 2015 Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014 Assessing Bank Branch Creditworthiness, Oct. 14, 2013 Methodology Applied To Bank Branch-Supported Transactions, Oct. 14, 2013 Europe Asset Isolation And Special-Purpose Entity Criteria--Structured Finance, Sept. 13, 2013 Counterparty Risk Framework Methodology And Assumptions, June 25, 2013 Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Understanding Standard & Poor's Rating Definitions, June 3, 2009 Qualification And Treatment Of Current-Pay Obligations In Global Cash Flow CLOs, July 11, 2007 Related research European CLO Performance Index Report Q1 2016: The Impact Of Brexit On The European CLO Market, May 3, EMEA Structured Credit Scenario And Sensitivity Analysis, Aug. 6, 2015 Credit Rating Model: CDO Evaluator 6.3, Oct. 17, 2014 European Structured Finance Scenario And Sensitivity Analysis 2014: The Effects Of The Top Five Macroeconomic Factors, July 8, 2014 Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 Use Of CDO Monitor Simplified, April 7, 2014 What Are Credit Estimates And How Do They Differ From Ratings?, April 6, 2011 Credit Rating Model: S&P Cash Flow Evaluator, Aug. 17, 2010 Appendix: Other Defined Terms MAY 16,

21 Break-even default rate (BDR) S&P Global Ratings uses its proprietary cash flow model to determine an applicable percentile BDR for each tranche at specific rating levels. The BDR represents our estimate of the maximum level of gross defaults, based on our stress assumptions, that a tranche can withstand and still fully repay the noteholders (see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Sept. 17, 2015, for further information on BDRs and our corporate cash flow criteria). Cushion The cushion is the excess of the tranche BDR above the scenario default rate (SDR) at the assigned rating for a given class of rated notes. S&P Global Ratings' credit rating The S&P Global Ratings' credit rating is the public rating, which is typically the issuer credit rating. SDR The SDR is the minimum level of portfolio defaults we expect each CDO tranche to be able to support the specific rating level using the S&P Global Ratings' CDO Evaluator. Effective date portfolio The expected portfolio consists of collateral that has already been purchased and/or collateral for which a commitment to purchase has been initiated, as well as hypothetical portfolio information that the arrangers present to S&P Global Ratings for its rating analysis. Additional Contact: Structured Finance Europe; StructuredFinanceEurope@standardandpoors.com MAY 16,

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