Research: Rating Action: Moody's upgrades rating on one class of notes issued by ZAIS CLO 7, Limited
Interest Income

Analysis: Score Motion: Moody’s upgrades ranking on one class of notes issued by ZAIS CLO 7, Restricted

$66.0 million of notes affected

New York, March 16, 2023 — Moody’s Traders Service (“Moody’s”) has upgraded  the ranking on the next notes issued by ZAIS CLO 7, Restricted:

U.S.$66,000,000 Class B Senior Secured Floating Fee Notes due 2030 (the “Class B Notes”), Upgraded to Aaa (sf); beforehand on July 29, 2021 Upgraded to Aa1 (sf)

ZAIS CLO 7, Restricted, issued in October 2017, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured company loans. The transaction’s reinvestment interval resulted in April 2022.

RATINGS RATIONALE

The ranking motion is primarily a results of deleveraging of the senior notes since February 2022. The Class A notes have been paid down by roughly 17.0% or $58.4 million since then. Based mostly on the trustee’s February 2023[1] report, the OC ratio for the Class A/B notes is reported at 130.07%, versus February 2022[2] ranges of 128.57%.

Moody’s modeled the transaction utilizing a money stream mannequin primarily based on the Binomial Enlargement Approach, as described in “Moody’s World Method to Score Collateralized Mortgage Obligations.”

The important thing mannequin inputs Moody’s utilized in its evaluation, similar to par, weighted common ranking issue, range rating, weighted common unfold, and weighted common restoration charge, are primarily based on its printed methodology and will differ from the trustee’s reported numbers. For modeling functions, Moody’s used the next base-case assumptions:

Performing par and principal proceeds stability: $459,808,797

Defaulted par:  $13,623,103

Range Rating: 75

Weighted Common Score Issue (WARF): 2780

Weighted Common Unfold (WAS) (earlier than accounting for reference charge flooring): 3.84%

Weighted Common Restoration Fee (WARR): 47.25%

Weighted Common Life (WAL): 3.72 years

Along with base case evaluation, Moody’s ran extra situations the place outcomes may diverge from the bottom case. The extra situations think about a number of components individually or together, and embody: defaults by obligors whose low scores or debt costs counsel misery, defaults by obligors with potential refinancing danger, deterioration within the credit score high quality of the underlying portfolio, lower in total WAS or web curiosity revenue, and decrease recoveries on defaulted property.

Methodology Used for the Score Motion

The principal methodology used on this ranking was “Moody’s World Method to Score Collateralized Mortgage Obligations” printed in December 2021 and out there at https://scores.moodys.com/api/rmc-documents/74832. Alternatively, please see the Score Methodologies web page on https://scores.moodys.com for a replica of this system.

Elements that Would Result in an Improve or Downgrade of the Score:

The efficiency of the rated notes is topic to uncertainty. The efficiency of the rated notes is delicate to the efficiency of the underlying portfolio, which in flip will depend on financial and credit score situations that will change. The Supervisor’s funding selections and administration of the transaction may also have an effect on the efficiency of the rated notes.

REGULATORY DISCLOSURES

For additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure type. Moody’s Score Symbols and Definitions may be discovered on https://scores.moodys.com/rating-definitions.

The evaluation depends on an evaluation of collateral traits to find out the collateral loss distribution, that’s, the perform that correlates to an assumption in regards to the probability of incidence to every degree of doable losses within the collateral. As a second step, Moody’s evaluates every doable collateral loss state of affairs utilizing a mannequin that replicates the related structural options to derive funds and due to this fact the final word potential losses for every rated instrument. The loss a rated instrument incurs in every collateral loss state of affairs, weighted by assumptions in regards to the probability of occasions in that state of affairs occurring, ends in the anticipated lack of the rated instrument.

Moody’s quantitative evaluation entails an analysis of situations that stress components contributing to sensitivity of scores and take note of the probability of extreme collateral losses or impaired money flows. Moody’s weights the influence on the rated devices primarily based on its assumptions of the probability of the occasions in such situations occurring.

For scores issued on a program, collection, class/class of debt or safety this announcement supplies sure regulatory disclosures in relation to every ranking of a subsequently issued bond or be aware of the identical collection, class/class of debt, safety or pursuant to a program for which the scores are derived solely from current scores in accordance with Moody’s ranking practices. For scores issued on a assist supplier, this announcement supplies sure regulatory disclosures in relation to the credit standing motion on the assist supplier and in relation to every specific credit standing motion for securities that derive their credit score scores from the assist supplier’s credit standing. For provisional scores, this announcement supplies sure regulatory disclosures in relation to the provisional ranking assigned, and in relation to a definitive ranking that could be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the task of the definitive ranking in a fashion that might have affected the ranking. For additional data please see the issuer/deal web page for the respective issuer on https://scores.moodys.com.

For any affected securities or rated entities receiving direct credit score assist from the first entity(ies) of this credit standing motion, and whose scores could change because of this credit standing motion, the related regulatory disclosures will probably be these of the guarantor entity. Exceptions to this strategy exist for the next disclosures, if relevant to jurisdiction: Ancillary Companies, Disclosure to rated entity, Disclosure from rated entity.

The ranking has been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.

This ranking is solicited. Please seek advice from Moody’s Coverage for Designating and Assigning Unsolicited Credit score Scores out there on its web site https://scores.moodys.com.

Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking evaluation.

Moody’s basic ideas for assessing environmental, social and governance (ESG) dangers in our credit score evaluation may be discovered at https://scores.moodys.com/paperwork/PBC_1288235.

The World Scale Credit score Score on this Credit score Score Announcement was issued by certainly one of Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Most important 60322, Germany, in accordance with Artwork.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit score Score Companies. Additional data on the EU endorsement standing and on the Moody’s workplace that issued the credit standing is out there on https://scores.moodys.com.

The World Scale Credit score Score on this Credit score Score Announcement was issued by certainly one of Moody’s associates outdoors the UK and is endorsed by Moody’s Traders Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA underneath the legislation relevant to credit standing companies within the UK. Additional data on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is out there on https://scores.moodys.com.

REFERENCES/CITATIONS

[1] Trustee report 6-Feb-2023

[2] Trustee report 4-Feb-2022

Please see https://scores.moodys.com for any updates on modifications to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.

Please see the issuer/deal web page on https://scores.moodys.com for extra regulatory disclosures for every credit standing.

Huangyi Shi
Analyst
Structured Finance Group
Moody’s Traders Service, Inc.
250 Greenwich Avenue
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653

Aniket Deshpande
VP – Sr Credit score Officer/Supervisor
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653

Releasing Workplace:
Moody’s Traders Service, Inc.
250 Greenwich Avenue
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Shopper Service: 1 212 553 1653

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