Research: Rating Action: Moody’s upgrades ratings on two classes of notes assisted by MJX Venture Management II LLC and collateralized by Venture XXVII CLO, Limited


Approximately $3.3 million of notes affected

New York, July 05, 2022 — Moody’s Investors Service (“Moody’s”) has upgraded the ratings on the following notes issued by MJX Venture Management II LLC (the “Issuer” or “MJX VM II”) and collateralized by notes issued by Venture XXVII CLO, Limited.:

US $1,525,000 Series A/Class C Notes due 2030, Upgraded to Aa2 (sf); previously on May 19, 2017 Assigned Aa3 (sf)

US $1,800,000 Series A/Class D Notes due 2030, Upgraded to A2 (sf); previously on October 30, 2020 Confirmed at A3 (sf)

The Series A/Class C Notes, and the Series A/Class D Notes, together with the other notes issued by the Issuer (the “Rated Notes”), are collateralized primarily by 5% of certain rated notes (the “Underlying CLO Notes” “) issued by Venture XXVII, Limited (the “Underlying CLO”). The Rated Notes were issued in May 2017 in order to comply with the retention requirements of both the US and EU Risk Retention Rules.

RATINGS RATIONALE

These rating actions reflect the benefit of the short period of time remaining before the end of the Underlying CLO’s reinvestment period in July 2022. In light of the reinvestment restrictions during the amortization period which limit the ability of the manager to effect significant changes to the current collateral pool, Moody’s analyzed the Underlying CLO assuming a higher probability that the collateral pool characteristics will continue to satisfy certain covenant requirements. In particular, Moody’s assumed that the Underlying CLO will benefit from lower WARF, and higher diversity levels compared to their covenant levels. Moody’s modeled a WARF of 2564 and diversity of 111 compared to their respective covenant levels of 3018, and 100. Furthermore, the Underlying CLO’s reported collateral quality and OC ratios have been stable.

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 in analyzing the Underlying CLO:

Performing par and principal proceeds balance: $586,281,318

Defaulted par: $4,667,206

Diversity score: 111

Weighted Average Rating Factor (WARF): 2564

Weighted Average Spread (WAS) (before accounting for reference rate floors): 3.63%

Weighted Average Recovery Rate (WARR): 47.06%

Weighted Average Life (WAL): 4.55 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 did not use any stress scenario simulations in its analysis.

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.

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.

Kevin Anthony
Asst Vice President – 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

Ramon O. Torres
Senior Vice President/Manager
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

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