Flatiron RR CLO 27 reset draws Fitch ratings for U.S. leveraged loan refinancing
A reset of Flatiron RR CLO 27 is moving ahead with new ratings on a refinancing tied to a roughly $400 million portfolio of leveraged loans. The transaction replaces outstanding notes with new secured debt and additional subordinated notes while extending financing under a five-year reinvestment structure.
Highlights
- Flatiron RR CLO 27 Ltd. received Fitch Ratings and Outlooks for its reset, refinancing a $400 million portfolio primarily of first-lien senior secured leveraged loans.
- Indicative portfolio has average credit quality of 'B+'/'B', weighted average rating factor 22.27, managed against a Fitch WARF covenant test matrix.
- Portfolio comprises 99.19% first-lien senior secured loans with a 73.83% weighted average recovery rate, with risk managed to Fitch's recovery rate covenant.
Transaction structure and portfolio metrics
As reported by Fitch Ratings, Flatiron RR CLO 27 Ltd. has received ratings and Rating Outlooks for its reset transaction, with net proceeds from new secured debt and additional subordinated notes set to redeem outstanding notes and finance a portfolio of approximately $400 million made up primarily of first-lien senior secured leveraged loans.The issuer is an arbitrage cash flow collateralized loan obligation managed by Flatiron RR LLC, and the deal originally closed in November 2024. Fitch says the indicative portfolio carries average credit quality of 'B+'/'B', broadly in line with recent CLOs, with a weighted average rating factor of 22.27 that will be managed against a WARF covenant from a Fitch test matrix.
The indicative portfolio consists of 99.19% first-lien senior secured loans and has a weighted average recovery rate of 73.83%, which will also be managed to a covenant from Fitch's test matrix. Fitch adds that the notes benefit from credit enhancement and standard U.S. CLO structural features, even though borrowers in the 'B' category are considered highly speculative.
Our earlier coverage of Hainan Rubber’s proposed subordinated perpetual sustainable securities explained how the group aimed to refinance offshore debt via notes issued by its majority-owned unit Halcyon Agri and guaranteed on a subordinated basis. We outlined why the instruments were rated below the issuer level, highlighting their lower ranking in the capital structure and the issuer’s ability to defer coupons, alongside Fitch’s view of leverage and liquidity.
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