Research: Rating Action: Moody’s upgrades ratings on five classes of notes issued by Venture XXIV CLO, Limited


$119.5 million of notes affected

New York, June 30, 2022 — Moody’s Investors Service (“Moody’s”) has upgraded the ratings on the following notes issued by Venture XXIV CLO, Limited:

US $58,000,000 Class B-RR Senior Secured Floating Rate Notes due 2028 (the “Class B-RR Notes”), Upgraded to Aaa (sf); previously on March 18, 2021 Assigned Aa1 (sf)

US $22,500,000 Class C-1RR Mezzanine Secured Deferrable Floating Rate Notes due 2028 (the “Class C-1RR Notes”), Upgraded to Aa1 (sf); previously on March 18, 2021 Assigned Aa2 (sf)

US $12,000,000 Class C-FRR Mezzanine Secured Deferrable Fixed Rate Notes due 2028 (the “Class C-FRR Notes”), Upgraded to Aa1 (sf); previously on March 18, 2021 Assigned Aa2 (sf)

US $15,000,000 Class D-1RR Mezzanine Secured Deferrable Floating Rate Notes due 2028 (the “Class D-1RR Notes”), Upgraded to A1 (sf); previously on March 18, 2021 Assigned A2 (sf)

US $12,000,000 Class D-2 Mezzanine Secured Deferrable Floating Rate Notes due 2028 (the “Class D-2 Notes”), Upgraded to Baa1 (sf); previously on January 29, 2021 Upgraded to Baa2 (sf)

Venture XXIV CLO, Limited, originally issued in September 2016 and partially refinanced in September 2019 and March 2021, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transactions’s reinvestment period ended in October 2020.

RATINGS RATIONALE

These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction’s over-collateralization (OC) ratios since June 2021. The Class A-RR notes have been paid down by approximately 11% or $37.3 million since June 2021. .Based on the trustee’s June 2022 report[1]the OC ratios for the Class A/B, and Class C notes are reported at 132.25%, and 120.31%, respectively, versus June 2021 [2]levels of 130.40%, and 119.67%, respectively.

The deal has also benefited from an improvement in the credit quality of the portfolio since June 2021. Based on the trustee’s June 2022 report[3]the weighted average rating factor (WARF) is currently 2387 compared to 2456 in June 2021[4].

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.”

The key model inputs Moody’s used in its analysis, such as par, weighted average rating factor, diversity score, weighted average spread, and weighted average recovery rate, are based on its published methodology and could differ from the trustee’s reported numbers. For modeling purposes, Moody’s used the following base-case assumptions:

Performing par and principal proceeds balance: $461,951,517

Defaulted par: $5,188,958

Diversity score: 86

Weighted Average Rating Factor (WARF): 2406

Weighted Average Spread (WAS) (before accounting for LIBOR floors): 3.26%

Weighted Average Coupon (WAC): 13.25%

Weighted Average Recovery Rate (WARR): 47.93%

Weighted Average Life (WAL): 3.3 years

In addition to base case analysis, Moody’s considered additional scenarios where outcomes could diverging from the base case. These additional scenarios include, among others, near term defaults by companies facing liquidity pressure, decrease in overall WAS and lower recoveries on defaulted assets.

Methodology Used for the Rating Action

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

Factors that Would Lead to an Upgrade or Downgrade of the Ratings:

The performance of the rated notes is subject to uncertainty. The performance of the rated notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager’s investment decisions and management of the transaction will also affect the performance of the rated notes.

REGULATORY DISCLOSURES

For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody’s evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss of a rated instrument incurs in each collateral 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 entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impairment cash flows. Moodys weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK . Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.

REFERENCES/CITATIONS

[1] Trustee report 06-Jun-2022

[2] Trustee report 04-Jun-2021

[3] Trustee report 06-Jun-2022

[4] Trustee report 04-Jun-2021

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

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Yuhan Zhou
Associate Lead Analyst
Structured Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

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

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

Leave a Comment