Fitch assigns ratings to Bain Capital Credit CLO 2017-2 refinancing notes

Traders Union
All News
Business & Wealth
Companies
Bain Capital CLO refinancing ratings

Highlights

Bain Capital Credit CLO 2017-2 refinances class A-1-R3, A-2-R3, B-R3, C-R3, and D-2-R3 notes, totaling about $492 million in portfolio value.
Fitch assigns ratings with Stable Outlooks based on a portfolio averaging 'B' credit quality, 23.52 WARF, and 73% weighted average recovery rate, comprising 97.1% first-lien senior secured loans.
The CLO features a 2.7-year reinvestment period, with reinvestment criteria and stress scenario resilience similar to recent CLOs, and concentrated obligor/industry limits.

Refinancing structure and rating rationale

As reported by Fitch Ratings, the agency has assigned ratings and Rating Outlooks to Bain Capital Credit CLO 2017-2 limited refinancing notes and has affirmed the class D-1-R3 and E-R3 notes with Stable Outlooks.

Bain Capital Credit CLO 2017-2, Limited is an arbitrage cash flow collateralized loan obligation that will be managed by Bain Capital Credit, LP. Fitch says it was originally engaged on the deal for the July 2024 reset, and this transaction marks the fourth refinancing in which the class A-1-R3, A-2-R3, B-R3, C-R3 and D-2-R3 notes will be refinanced in whole.

Net proceeds from the issuance of the secured and subordinated notes will finance a portfolio of about $492 million. The underlying assets consist primarily of first-lien senior secured leveraged loans.

Portfolio quality and structural protections

The ratings analysis reflects an indicative portfolio with average credit quality of 'B', which Fitch says is in line with recent CLOs. The portfolio has a weighted average rating factor of 23.52 and will be managed to a WARF covenant from a Fitch test matrix.

The indicative portfolio consists of 97.1% first-lien senior secured loans and carries a weighted average recovery rate of 73%, with management to a WARR covenant from a Fitch test matrix. Fitch also says the largest three industries may account for as much as 42.5% of the portfolio balance in aggregate, while the top five obligors may represent up to 12.5% at the initial example matrix point.

The transaction has a 2.7-year reinvestment period and reinvestment criteria that Fitch describes as similar to other CLOs. Using its proprietary cash flow model, the agency says the rated notes can withstand default and recovery assumptions consistent with their assigned ratings under its stress scenarios, while weighted average life assumptions are reduced by up to 12 months for WAL covenants above six years to reflect structural and reinvestment conditions after the reinvestment period.

Our earlier coverage of Hainan Rubber’s proposed subordinated perpetual securities explained how the company planned to refinance offshore debt via notes issued by its majority-owned unit Halcyon Agri and guaranteed on a subordinated basis. We highlighted Fitch’s rationale for rating the instruments below the issuer rating due to their lower ranking in the capital structure and coupon deferral features, alongside the agency’s view of leverage and liquidity support.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.