Atrium XII/Atrium XII LLC

Transcription

1 Presale: Atrium XII/Atrium XII LLC Primary Credit Analyst: Alexander Dennis, CFA, Chicago (1) ; Secondary Contact: Andrew J Loken, New York (1) ; andrew.loken@standardandpoors.com U.S. Commercial Credit: Winston W Chang, Lead Analytical Manager, New York (1) ; winston.chang@standardandpoors.com Table Of Contents $ Million Floating-Rate tes Rationale Rating Considerations Portfolio Analysis Top Obligor Holdings Industry Distribution Rating Distribution Maturity Distribution Spread Distribution Recovery Rate Distribution Sensitivity Analysis Structural Overview SEPTEMBER 29,

2 Table Of Contents (cont.) Collateral Pool Guidelines Overcollateralization, Interest Coverage, And Overcollateralization Tests Events Of Default Payment Priorities Collateral Manager te Redemption Re-Pricing Surveillance Related Criteria And Research Appendix: Other Defined Terms SEPTEMBER 29,

3 Presale: Atrium XII/Atrium XII LLC $ Million Floating-Rate tes This presale report is based on information as of Sept. 29, 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. Standard & Poor's Ratings Services' portfolio analysis for this transaction is based on the collateral manager's decision to manage this transaction to maintain the portfolio collateral's original credit quality. This analysis generally reflects the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager. It may also reflect our assumptions about the transaction's investment guidelines. The results from Standard & Poor's CDO Evaluator, cash flow model, and sensitivity analysis take into account the above-mentioned portfolio along with the additional assumptions or stresses that form the basis for the assigned preliminary ratings. Preliminary Ratings As Of Sept. 29, 2015 Class Preliminary rating (i) Preliminary amount (Mil. $) Interest rate (%) A AAA (sf) Three-month LIBOR plus 1.46 B AA (sf) Three-month LIBOR plus 2.20 C NR Three-month LIBOR plus 2.95 D NR Three-month LIBOR plus 3.75 E NR Three-month LIBOR plus 5.60 F NR Three-month LIBOR plus 7.25 Subordinated notes Subordination (%) SDR (%) BDR (%) BDR cushion (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A 8.21 N/A N/A N/A NR N/A N/A N/A N/A N/A (i) The rating on each class of securities is preliminary and subject to change at any time. SDR--Scenario default rate. BDR--Break-even default rate. NR--t rated. N/A--t applicable. Supplemental Tests As Of Sept. 29, Overcollateralization (Mil. $)-- Class Preliminary rating Preliminary amount (Mil. $) Target portfolio Largest industry default test Largest obligor default test A AAA (sf) B AA (sf) SEPTEMBER 29,

4 Transaction Profile Expected closing date October 2015 Effective date TBD period end date April 22, 2020 n-call period end date Oct. 22, 2017 Stated maturity date Oct. 22, 2026 Total preliminary rated amount $ million Total note balance (including the subordinated notes) $ million Collateral A revolving pool consisting primarily of broadly syndicated senior secured loans Structure type A cash flow collateralized loan obligation consisting of broadly syndicated loans Structure purpose Arbitrage Management An actively managed portfolio te payment frequency Quarterly, beginning April 22, 2016 Issuer Atrium XII (organized under the laws of the Cayman Islands) Co-issuer Atrium XII LLC (incorporated in Delaware) Initial purchaser Credit Suisse Securities (USA) LLC Trustee Wells Fargo Hedge counterparty ne TBD--To be determined. Collateral Manager Collateral manager Credit Suisse Asset Management LLC Senior/subordinated/incentive management fee (bps) 15/35/2000 Number of Standard & Poor's-rated U.S. CLOs managed (i) 19 Standard & Poor's-rated U.S. CLO assets under management (i) $10.81 billion (i) As of June Bps--Basis points. CLOs--Collateralized loan obligations. Portfolio Information As Of Sept. 29, 2015 Target assets (Mil. $) Target par balance Par balance of identified collateral Par balance of collateral not yet identified Eligible investments N/A Standard & Poor's rating (% of identified collateral) Standard & Poor's implied rating (% of identified collateral) 2.06 Obligors identified. of obligors 104 Avg. obligor holding (%) 0.96 Largest-obligor holding (%) 1.24 Smallest-obligor holding (%) 0.40 Benchmark statistics Maximum weighted avg. maturity (approx. years) 8.00 Portfolio weighted avg. maturity (years) Minimum weighted avg. rating N/A SEPTEMBER 29,

5 Portfolio Information As Of Sept. 29, 2015 (cont.) Portfolio weighted avg. rating B+ Minimum weighted avg. spread (%) 3.80 Portfolio weighted avg. spread (%) 3.81 Portfolio weighted avg. spread, including LIBOR floors (%) 4.45 Standard & Poor's default measure (%) 5.84 N/A--t applicable. Rationale The preliminary ratings we assigned to Atrium XII/ Atrium XII LLC's floating-rate notes reflect our assessment of: The credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes. The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation (CDO) criteria (see "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Aug. 1, 2014). The transaction's legal structure, which is expected to be bankruptcy remote. The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. The collateral manager's experienced management team. The transaction's ability to make timely interest and ultimate principal payments on the preliminary rated notes, which we assessed using our cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from % to %. The transaction's overcollateralization and interest coverage tests, a failure of which would lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. Rating Considerations In our analysis, we considered the following factors, among others: The transaction will be exposed to the market value of defaulted assets and assets rated 'CCC+' or lower. Any defaulted assets in the portfolio will be carried at the lower of their recovery rate or market value in the O/C tests' numerator, and any assets rated 'CCC+' or lower that exceed 7.5% of the portfolio's collateral value will be carried at the market value in the O/C tests' numerator. The collateral manager can purchase covenant-lite loans (loans that do not contain financial covenants for the lending party's benefit or that do not require continued compliance with one or more financial covenants) for up to 70.0% of the collateral pool. In our cash flow analysis, we use reduced recovery rates to reflect the lower expected recoveries if the covenant-lite loans default. An event of default would be triggered if the class A notes' O/C ratio falls below 102.5%. Therefore, the probability of an event of would increase if the portfolio's credit quality deteriorated significantly and market values decreased. According to the transaction documents, the event of default overcollateralization ratio is calculated without SEPTEMBER 29,

6 ratings-based haircuts. The trigger level and the vesting of voting rights for acceleration and liquidation are consistent with Standard & Poor's CDO criteria (see "The Use Of Rating-Based Haircuts In Event Of Default Overcollateralization Tests For CDOs," March 19, 2008). The collateral manager may purchase current-pay obligations for up to 2.5% of the collateral pool. We analyzed the transaction assuming that the portfolio holds the maximum amount of current-pay obligations that are eligible for purchase and that each is rated 'CCC-'. This analysis is consistent with our global cash flow CDO criteria (see "Qualification And Treatment Of Current-Pay Obligations In Global Cash Flow CLOs," July 11, 2007). The collateral manager can enter into trading plans to satisfy the reinvestment guidelines, even though a single trade that is part of the trading plan may not independently satisfy all of the reinvestment guidelines. However, according to the transaction documents, only one trading plan may be entered into at a time, each trading plan may not account for more than 5.0% of the portfolio's collateral amount, each trading plan may not include a determination date on the notes and must be completed within 10 business days, and the collateral manager's ability to enter into future trading plans may be prohibited if any previous trading plan resulted in the deterioration of the issuer's compliance with any of the reinvestment guidelines. Our quantitative analysis also reflects the transaction's ability to invest in certain securities within the concentration limits, including up to 10.0% of the portfolio in obligations that pay less frequently than quarterly but at least semiannually and up to 7.5% of the portfolio in fixed-rate obligations. The collateral manager cannot purchase any collateral assets that mature beyond the stated maturity date or vote in favor of any waiver, modification, amendment, or variance that would extend a collateral obligation's maturity beyond the stated maturity date. Also, according to the transaction documents, the weighted average life test will be satisfied, maintained, d after the waiver, modification, amendment, or variance. A CLO concentrated in long-dated assets could be exposed to market value risk at maturity because the collateral manager may have to sell long-dated assets for less than par to repay the CLO's subordinate rated notes when they mature (see "CDO Spotlight: The Relationship Between Long-Dated Assets And Market Value Risk In U.S. Cash Flow CLOs," April 26, 2012). The transaction documents allow for reinvestments of credit risk and prepaid collateral after the reinvestment period as long as certain conditions are met (see the section). The transaction will benefit from a reinvestment overcollateralization test, a failure of which would lead to the reclassification of up to 50.0% of the excess interest proceeds that are available before paying uncapped administrative expenses and fees, hedge payments, incentive management fees, and subordinate note payments as principal proceeds. Portfolio Analysis As of Sept. 29, 2015, the issuer had identified 60.63% of the total assets expected to be acquired. As the portfolio composition changes, the information and results presented in Tables 1-7 and Charts 1-5 are also likely to change. Top Obligor Holdings The identified collateral pool presented to Standard & Poor's for its rating analysis consisted of obligors in the industries shown in Table 1. SEPTEMBER 29,

7 Table 1 Top Obligor Holdings As Of Sept. 29, 2015 Obligor reference Industry 1 Business equipment and services Security type Senior secured 2 Drugs Senior secured 3 Industrial equipment Senior secured 4 Containers and glass products Senior secured 5 Health care Senior secured 6 Food products Senior secured 7 Food/drug retailers Senior secured 8 Diversified insurance Senior secured 9 Business equipment and services 10 Business equipment and services Senior secured Senior secured --tional amount (Mil. $)-- --tional amount (%)-- Standard & Poor s rating Obligor Cumulative Obligor Cumulative B BB B B B BB B B B BB N/A--t applicable. Industry Distribution The collateral pool presented to Standard & Poor's for its rating analysis consists of the industry concentrations shown in Chart 1. SEPTEMBER 29,

8 Chart 1 Rating Distribution The collateral pool presented to Standard & Poor's for its rating analysis consists of the rating distributions shown in Chart 2. SEPTEMBER 29,

9 Chart 2 Maturity Distribution The collateral pool presented to Standard & Poor's for its rating analysis consists of the maturity distributions shown in Chart 3. SEPTEMBER 29,

10 Chart 3 Spread Distribution The identified collateral pool presented to Standard & Poor's for its rating analysis consists of the spread distribution shown in Table 2 and Chart 4. Table 2 Performing Identified Collateral Spread Distribution Actual weighted avg. spread (%) 3.75 Standard deviation of spread (%) 0.96 Minimum weighted avg. spread covenant (%) 3.80 Actual weighted avg. spread, including LIBOR floors (%) 4.39 Actual weighted avg. LIBOR floor (%) SEPTEMBER 29,

11 Chart 4 Recovery Rate Distribution The identified collateral pool presented to Standard & Poor's for its rating analysis consists of the recovery rate distribution shown in Table 3 and the recovery rating distribution shown in Chart 5. Table 3 Performing Identified Collateral Recovery Rate Distribution (Based On % Of Par) Weighted avg. recovery rate (%) AAA (sf) AA (sf) Standard deviation of recovery rate (%) AAA (sf) AA (sf) Minimum weighted avg. recovery rate covenant (%) AAA (sf) AA (sf) SEPTEMBER 29,

12 Chart 5 Sensitivity Analysis Recovery rate sensitivity In addition to our base-case analysis, we generated scenarios in which we made positive and negative adjustments (10% each) to the proposed collateral pool's recovery rates relative to each tranche's weighted average recovery rate (see Table 4). Table 4 Recovery Rate Sensitivity As Of Sept. 29, 2015 Class Preliminary rating --Resulting rating transition-- --BDR cushion at indicated rating (%)-- 10% recovery increase 10% recovery decrease Current (based on preliminary rating) 10% recovery increase 10% recovery decrease A AAA (sf) AAA (sf) AA+ (sf) B AA (sf) AA (sf) AA- (sf) BDR--Break-even default rate. SEPTEMBER 29,

13 Correlation sensitivity In addition to our base-case analysis, we generated scenarios by adjusting the intra- and inter-industry correlations to assess the proposed portfolio's sensitivity to different correlation assumptions, assuming the three correlation scenarios outlined in Tables 5 and 6. Table 5 Correlation Scenario Within industry (%) Between industries (%) Below base case Base case equals preliminary rating Above base case Table 6 Correlation Sensitivity As Of Sept. 29, Resulting rating transition-- --BDR cushion at indicated rating (%)-- Class Base case Below base case Above base case Base case Below base case Above base case A AAA (sf) AAA (sf) AA+ (sf) B AA (sf) AA (sf) AA- (sf) BDR--Break-even default rate. Default biasing To assess whether the proposed portfolio has sufficient diversity, we biased defaults on the assets in the proposed collateral pool with the highest spread and lowest base-case recoveries (see Table 7). Table 7 Default Biasing As Of Sept. 29, 2015 Class Preliminary rating Resulting rating transition A AAA (sf) AA+ (sf) B AA (sf) A+ (sf) Structural Overview Atrium XII, the issuer, is an exempted company incorporated with limited liability under the laws of the Cayman Islands. Atrium XII LLC, the co-issuer, is a limited liability company organized under Delaware law. The issuer's and co-issuer's only purposes are to acquire the collateral portfolio, issue the notes, enter into the transaction documents, and engage in certain related transactions. Standard & Poor's expects the issuer's special-purpose entity provisions to be consistent with its bankruptcy-remoteness criteria. In rating this transaction, Standard & Poor's will review the legal matters that it believes are relevant to its analysis, as outlined in its criteria. Collateral Pool Guidelines Standard & Poor's expects the collateral pool to consist primarily of U.S. dollar-denominated senior secured loans to broadly syndicated corporate borrowers. SEPTEMBER 29,

14 We expect the collateral portfolio's effective date and reinvestment guidelines to comply with the limitations shown in Table 8. Table 8 Collateral Pool Guidelines Limit (%) Purchase limitations Assets purchased at 50.0% below par 0.0 Bonds 0.0 Letters of credit 0.0 Long-dated assets 0.0 Obligations with an attached equity feature 0.0 Step-down obligations 0.0 Step-up obligations 0.0 Structured finance obligations 0.0 Zero-coupon obligations 0.0 Obligation type Other than senior secured loans 7.5 Covenant-lite loans 70.0 Current-pay obligations 2.5 Debtor-in-possession obligations 7.5 Deferrable obligations 0.0 Delayed-drawdown and revolving obligations 10.0 Fixed-rate obligations 7.5 Obligations that pay interest less frequent than quarterly 10.0 Obligor and its affiliates: single/up to five 2.0/2.5 Partially deferrable obligations 5.0 Participation interests 10.0 Second-lien and senior unsecured loans 7.5 Standard & Poor's industry classification: single/up to two/largest 10.0/12.0/15.0 Standard & Poor's rating derived from another agency 10.0 Standard & Poor's rating of 'CCC+' or below 7.5 Location Other than the U.S Emerging markets 0.0 N/A--t applicable. Overcollateralization, Interest Coverage, And Overcollateralization Tests In our view, the transaction benefits from certain structural features that require sequential mandatory redemption of the preliminary rated notes upon a breach of any overcollateralization or interest coverage test or the reinvestment of SEPTEMBER 29,

15 some of the excess interest proceeds upon a breach of any interest diversion test (see Table 9). Table 9 Overcollateralization, Interest Coverage, And Interest Diversion Tests Class Min. O/C required (%) Min. I/C required (%) A/B C D E O/C test (i) N/A (i) The interest diversion test will be satisfied when the class E overcollateralization test is equal to or higher than the specified level. O/C----Overcollateralization. I/C--Interest coverage. Events Of Default Under certain conditions, the following events of default may result in the acceleration of payments to the preliminary rated notes and in the collateral's liquidation: A failure to pay interest, when due and payable, to the class A and B notes; or if there are no class A or B notes outstanding, a failure to pay interest to the controlling class (each within the related three-business-day grace period). A failure to pay principal, interest, deferred interest, or the redemption price on any rated note at its stated maturity or on a redemption date. A failure to disburse amounts exceeding $1,000 from the payment account according to the payment priority (subject to a three-business-day grace period). The issuer, co-issuer, or collateral pool is required to register as an investment company under the Investment Company Act of Certain covenants under the legal documents are breached and are not cured within the 30-day cure period. The class A O/C ratio falls below 102.5%. The event-of-default O/C ratio is calculated without ratings-based haircuts but includes defaulted assets carried at the lower of their recovery rate or market value. The trigger level and vesting of voting rights for acceleration and liquidation are consistent with Standard & Poor's CDO criteria (see "The Use Of Rating-Based Haircuts In Event Of Default Overcollateralization Tests For CDOs," March 19, 2008). The issuer's or co-issuer's voluntary or involuntary bankruptcy. Payment Priorities Under the transaction documents, the collateral's interest and principal collections are payable according to separate payment priorities. During and after the reinvestment period On each payment date during and after the reinvestment period, unless an acceleration following an event of default, interest collections will be distributed in the order of priority outlined in Table SEPTEMBER 29,

16 Table 10 Interest Waterfall (During And After The Period, Unless It Is A Post-Acceleration Payment Date, Redemption Date, Or The Stated Maturity Date) Priority Payment 1 Taxes and fees, and then administrative expenses (capped) 2 Base management fee and the first distribution amount, pro rata 3 Deposit a sum equal to the liquidity reserve amount into the interest collection account, and then hedge payments, if applicable, pro rata 4 Class A note interest 5 Class B note interest 6 Class A/B coverage tests (i) 7 Class C note interest 8 Class C coverage tests (i) 9 Class C note deferred interest 10 Class D note interest 11 Class D coverage tests (i) 12 Class D note deferred interest 13 Class E note interest. 14 Class E coverage tests (i) 15 Class E note deferred interest 16 Class F note interest 17 Class F note deferred interest 18 overcollateralization test (during the reinvestment period only). If it fails, use the lesser of 50% of the remaining interest proceeds or the amount needed to satisfy the test to purchase additional collateral obligations or pay according to the note payment sequence (ii) 19 Subordinated management fee and the second distribution amount, pro rata 20 Administrative expenses (uncapped), and then hedge payments, if applicable, pro rata 21 Deposit to the supplemental reserve account, at the manager's direction 22 Incentive management fee, the third distribution amount, and subordinated noteholders (iii) (i) If fail, pay according to the note payment sequence until each test is satisfied. (ii) te payment sequence: Class A note interest; then class A note principal; then class B note interest; then class B note principal; then class C note interest; then class C note deferred interest; then class C note principal; then class D note interest; then class D note deferred interest; then class D note principal, then class E note interest; then class E note deferred interest; then class E note principal; then class F note interest; then class F note deferred interest; and then class F note principal. (iii) If an effective date rating confirmation failure occurs, proceeds will instead be used to purchase additional collateral to the extent necessary to obtain rating confirmation. On each payment date during and after the reinvestment period unless an acceleration following an event of default, principal collections will be distributed in the order of priority outlined in Table 11. Table 11 Principal Waterfall (During And After The Period, Unless It Is A Post-Acceleration Payment Date, Redemption Date, Or The Stated Maturity Date) Priority Payment 1 Items 1-17 of the interest waterfall, sequentially (i) 2 On a special or optional redemption date, or in connection with a tax event, pay the redemption amount according to the note payment sequence (ii), and then pay Items 3-8 below SEPTEMBER 29,

17 Table 11 Principal Waterfall (During And After The Period, Unless It Is A Post-Acceleration Payment Date, Redemption Date, Or The Stated Maturity Date) (cont.) 3 During the reinvestment period, purchase additional collateral obligations. After the reinvestment period, reinvest proceeds from the sale of credit risk assets and unscheduled principal payments only 4 After reinvestment period, note payment sequence (ii) 5 After the reinvestment period, any unpaid base management fee or subordinated management fee, and distribution amounts, pro rata 6 After the reinvestment period, administrative expenses (uncapped) 7 After the reinvestment period, hedge payments, if applicable, pro rata 8 Incentive management fee, the third distribution amount, and subordinated noteholders (i) In the case of Items 7, 9, 10, 12, 13, 15, 16, and 17 of the interest waterfall, only to the extent that the relevant class is the controlling class. (ii) te payment sequence: class X and A note interest, pro rata; then class X and A note principal, pro rata; then class B note interest; then class B note principal; then class C note interest; then class C note deferred interest; then class C note principal, then class D note interest; then class D note deferred interest; then class D note principal; then class E note interest, then class E note deferred interest; then class E note principal; then class F note interest; then class F note deferred interest; and then class F note principal. After an event of default has occurred On any payment date, if an acceleration following an event of default, interest and principal proceeds will be distributed in the priority outlined in Table 12. Table 12 Interest And Principal Waterfall (Following A Post-Acceleration Payment Date, Redemption Date, Or The Stated Maturity Date) Priority Payment 1 Items 1-3 of the interest waterfall, sequentially 2 Class A note interest 3 Class A note principal 4 Class B note interest 5 Class B note principal 6 Class C note interest, and then deferred interest 7 Class C note principal. 8 Class D note interest, and then deferred interest 9 Class D note principal 10 Class E note interest, and then deferred interest 11 Class E note principal 12 Class F note interest, and then deferred interest 13 Class F note principal 14 Administrative expenses (uncapped), and then hedge payments, if applicable, pro rata 15 Subordinated management fee and the second distribution amount, pro rata 16 Incentive management fee, the third distribution amount, and subordinated noteholders SEPTEMBER 29,

18 Collateral Manager Credit Suisse Asset Management LLC, the transaction's collateral manager, is a wholly owned subsidiary of Credit Suisse Group AG and is a registered investment adviser under the Investment Advisers Act. At the end of 2014, Credit Suisse Asset Management LLC had over $42 billion in regulatory assets under management. Table 13 Summary Of Trading Conditions During Period Conditions to reinvest proceeds from each type of asset sold/received O/C tests? New asset minimum par amount? Standard & Poor's CDO Monitor test? Concentration limitations Collateral quality test New asset with an equal or a higher rating? New asset with the same or a shorter maturity? Credit d maintain, The aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance (i) maintain, Credit risk maintain, Sale proceeds, the aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance(i) N/A maintain, Defaulted Satisfy Sale proceeds, the aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance (i) N/A maintain, Discretionary maintain, The aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance (i) maintain, Equity maintain, N/A N/A maintain, Scheduled principal maintain, The aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance (i) maintain, SEPTEMBER 29,

19 Table 13 Summary Of Trading Conditions During Period (cont.) Unscheduled principal maintain, The aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance (i) maintain, (i) target par balance: $800 million minus any reduction in the aggregate notes outstanding plus any principal proceeds from additional note issuances. CDO--Collateralized debt obligation. O/C--Overcollateralization. N/A--t applicable. Table 14 Summary Of Trading Conditions After Period Conditions to reinvest proceeds from each type of asset sold/received O/C tests? New asset minimum par amount? Standard & Poor's CDO Monitor? Concentration limitations Collateral quality test New asset with an equal or a higher rating? New asset with the same or a shorter maturity? Credit d not allowed Credit risk Satisfy Sale proceeds, the aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance (i) N/A maintain, Yes Yes Defaulted not allowed Discretionary not allowed Equity not allowed Scheduled principal not allowed Unscheduled principal Satisfy The aggregate principal balance will be maintained or increased, or the adjusted balance will exceed the reinvestment target par balance (i) N/A maintain, Yes Yes (i) target par balance: $800 million minus any reduction in the aggregate notes outstanding plus any principal proceeds from additional note issuances. O/C--Overcollateralization. CDO--Collateralized debt obligation. N/A--t applicable. SEPTEMBER 29,

20 te Redemption Mandatory redemption If a coverage test is not met on any applicable determination date, the issuer will apply amounts available in the payment account according to the payment priority. Optional redemption On any business day after the non-call period, the notes may be redeemed, in whole but not in part, at the direction of the holders of more than 50% of the subordinated notes' aggregate outstanding amount. Tax redemption If a tax event occurs, any class of notes may be redeemed, in whole but not in part, before their legal final maturity. Redemption can occur at the direction of the holders of at least 50% of the subordinated notes' aggregate outstanding amount. Refinancing On any payment date after the non-call period, any class of notes may be refinanced, in whole but not in part, at the direction of the holders of more than 50% of the subordinated notes' aggregate outstanding amount. Under the terms of the indenture, the issuer will obtain a partial refinancing only if the following conditions are met: Standard & Poor's is notified of the refinancing. The refinancing proceeds are sufficient to pay the redemption price of the notes being refinanced and any related expenses. The stated maturity of the obligations providing the refinancing is no earlier than that of the notes being refinanced. The refinancing proceeds are used to redeem the applicable notes. The agreements relating to the refinancing contain limited-recourse and nonpetition provisions that are equal to those of the notes being redeemed. The obligations providing the refinancing are not senior in the payment priority to the corresponding notes being redeemed. The interest rate of the notes providing the refinancing is no greater than that of the notes being redeemed. The voting rights, consent rights, redemption rights, and all other rights of the obligations providing the refinancing are the same as the rights of the corresponding class of secured notes being refinanced. The refinancing is completed solely through the issuance of new notes and not the sale of assets. Re-Pricing On any business day after the non-call period, at the written direction of more than 50% of the subordinated notes aggregate outstanding amounts, the issuers shall reduce the spread over LIBOR or stated interest rate for any class of notes, except the class A notes. SEPTEMBER 29,

21 Surveillance We will maintain active surveillance on the rated notes until the notes mature or are retired, or until our ratings on the transaction have been withdrawn. The purpose of surveillance is to assess whether the rated notes are performing within the initial parameters and assumptions applied to each rating category. The issuer is required under the transaction documents to supply periodic reports and notices to Standard & Poor's to maintain continuous surveillance on the rated notes. (For more information on our CLO surveillance process, please see "CDO Spotlight: Standard & Poor's Surveillance Process For Monitoring U.S. Cash Flow CLO Transactions," April 14, 2011.) Related Criteria And Research Related criteria Principles For Rating Debt Issues Based On Imputed Promises, Dec. 19, 2014 Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs, Aug. 1, 2014 Mapping A Third Party's Internal Credit Scoring System To Standard & Poor's Global Rating Scale, May 8, 2014 CDOs: CDOs Of Project Finance Debt: Global Methodology And Assumptions, March 19, 2014 Guarantee Criteria--Structured Finance, May 7, 2013 Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Global CDOs Of Pooled Structured Finance Assets: Methodology And Assumptions, Feb. 21, 2012 Methodology For Analyzing Rating Confirmation Requests To Establish Subsidiary Special-Purpose Entities In CDOs, Dec. 9, 2009 Surveillance Methodology For Global Cash Flow And Hybrid CDOs Subject To Acceleration Or Liquidation After An EOD, Sept. 2, 2009 Revised CDO Current-Pay Criteria Assumptions For Corporate Debt When Issuers Announce A Distressed Exchange Or Buyback, May 18, 2009 The Use Of Rating-Based Haircuts In Event Of Default Overcollateralization Tests For CDOs, March 19, 2008 Qualification And Treatment Of Current-Pay Obligations In Global Cash Flow CLOs, July 11, 2007 Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 CDO Spotlight: General Cash Flow Analytics For CDO Securitizations, Aug. 25, 2004 Structured Finance Criteria Introduced For Cayman Islands Special-Purpose Entities, July 18, 2002 Related research S&P Adds Transparency To Its Effective Date Process For CLOs, April 20, 2015 CDO Monitor n-model Approach General Definitions, March 11, 2015 Standard & Poor's Introduces n-model Version Of CDO Monitor, Dec. 8, 2014 Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 Industry Economic And Ratings Outlook: Favorable Conditions Will Likely Lead To Stable To Positive Ratings Activity Among U.S. CLOs, June 17, 2014 Use Of CDO Monitor Simplified, April 7, 2014 How Typical CLO Document Provisions Affect Maintenance Of Collateral Characteristics For Managed CLOs, v. 6, SEPTEMBER 29,

22 How Deferrable Assets In CLOs Are Treated Under Standard & Poor's Methodology, Oct. 1, 2012 CDO Spotlight: The Relationship Between Long-Dated Assets And Market Value Risk In U.S. Cash Flow CLOs, April 26, 2012 CDO Spotlight: Standard & Poor's Surveillance Process For Monitoring U.S. Cash Flow CLO Transactions, April 14, 2011 Credit FAQ: What Are Credit Estimates And How Do They Differ From Ratings? April 6, 2011 CLO Collateral Managers' Treatment Of First-Lien-Last-Out Loans Could Affect Payments To Investors, Oct. 14, 2010 Standard & Poor s Provides Guidance For Collateral Managers And Trustees Regarding CDO Monitor, v. 11, 2009 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, Appendix: Other Defined Terms Break-even default rate (BDR) Standard & Poor's uses its proprietary cash flow model to determine an applicable percentile BDR for each tranche at specific rating levels. The BDR represents Standard & Poor's 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 "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Aug. 1, 2014, for a full discussion of BDRs and our corporate cash flow criteria). BDR cushion The BDR 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. Standard & Poor's rating The Standard & Poor's rating is the public rating, which is typically the issuer credit rating. Standard & Poor's implied rating The Standard & Poor's implied rating is the rating used in the CDO Evaluator when a Standard & Poor's rating is not publicly available for the related entity or issue. This may include mapping a third party's credit score to Standard & Poor's global rating scale, or ratings derived from ancillary services and other services provided by Standard & Poor's. For more information, please visit the Understanding Ratings and Products & Capabilities site under spratings.com/about/who-we-are. SEPTEMBER 29,

23 Standard & Poor's default measure (DM) DM describes the annualized weighted average portfolio default rate. DM is computed by taking the average default probability of the assets, weighted by the principal balance, and then annualized by finding the constant annual default rate that gives the weighted-average default probability over the weighted average maturity of the portfolio. Unlike other measures of average default in use, DM encompasses all assets in the portfolio, including defaulted securities and cash, and it reflects the actual maturity of the assets. SDR The SDR is the minimum level of portfolio defaults we expect each CDO tranche to be able to support for each rating level, using Standard & Poor's CDO Evaluator. Subordination Subordination is calculated as the notes' total face amount (including the subordinated notes) that have payment priorities subordinate to the assessed class of notes divided by the notes' total face amount (including the subordinated notes). Target portfolio The target 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 Standard & Poor's for its rating analysis. SEPTEMBER 29,

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