Hayfin Emerald CLO II DAC notes upgraded by Fitch as deleveraging lifts credit support

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Hayfin Emerald CLO II DAC upgrade

Highlights

Fitch upgraded Hayfin Emerald CLO II DAC's class B-1R through E-R notes and affirmed class A-R and F-R notes after EUR71 million amortisation since April 2026.
Fitch's updated CLOs and Corporate CDOs Rating Criteria, effective 1 June 2026, increased the weighted average recovery rate to 62.9% from 61.5%, supporting the upgrade.
The portfolio remains well diversified with top 10 obligors at 25.6% of balance, 95.9% in senior secured obligations, and 15.9% of the portfolio on Negative Outlook.

Rating actions and portfolio changes

As reported by Fitch Ratings, the agency has upgraded Hayfin Emerald CLO II DAC's class B-1R through E-R notes and removed the class B-1R to F-R notes from Under Criteria Observation, while affirming the class A-R and F-R notes.

The upgrades follow a rise in credit enhancement across the structure. Fitch said the class A-R notes have amortised by EUR71 million since its previous review in April 2026, based on the latest payment date report of 17 September 2026, while par loss remains stable at 1.8%.

Under the rating action, class B-1R and B-2R move to AAAsf from AA+sf, class C-1R and C-2R rise to AAsf from A+sf, class D-R is upgraded to A-sf from BBBsf, and class E-R is lifted to BB+sf from BB-sf. The Outlooks for all notes remain Stable.

Criteria update and implications for the CLO market

Fitch said its updated CLOs and Corporate CDOs Rating Criteria, published on 1 June 2026, also supports the action by increasing the weighted average recovery rate to 62.9% from 61.5% at the last review.

The transaction is outside its reinvestment period, although it can continue to reinvest as long as failed tests are maintained or improved. Fitch based its upgrade analysis on a stressed portfolio with a four-year floor under its criteria, while using the current portfolio in its downgrade analysis.

The agency assesses the average credit quality of underlying obligors at 'B', with a weighted average rating factor of 24.3 under its latest criteria. Around 15.9% of the portfolio is on Negative Outlook, while 95.9% of assets are senior secured obligations, supporting comparatively stronger recovery expectations.

Fitch also describes the portfolio as well diversified across obligors, countries and industries. The top 10 obligors account for 25.6% of the portfolio balance, no single obligor exceeds 4.3%, and the three largest Fitch-defined industries represent 27.6%, although fixed-rate assets stand at 11.8%, above the 10% limit.

Fitch’s BBB- rating of Hainan Rubber’s proposed subordinated perpetual sustainable securities outlined how the notes’ junior ranking and coupon deferral features drove the assessment, with the instruments treated as effectively maturing at the first call date. Our earlier coverage also highlighted Fitch’s rationale for linking Hainan Rubber’s ratings to its parent and the company’s leverage and liquidity profile as it seeks to refinance offshore debt via its majority-owned unit Halcyon Agri.

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