DBRS Finalizes Rating on the Funding Facility of Shackleton 2017-XI CLO Funding LLC

DBRS, Inc. (DBRS) has today finalized the provisional rating of BBB (sf) on the Funding Facility due April 2026 (the Facility) of Shackleton 2017-XI CLO Funding LLC.

The finalized rating on the Facility is being assigned pursuant to the Warehouse Agreement, dated as at April 18, 2017, between Shackleton 2017-XI CLO Funding LLC as Borrower; Barclays Bank PLC (New York Branch) (Barclays) as Facility Agent; Alcentra NY, LLC (Alcentra NY) as Collateral Manager; and U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS) as Collateral Administrator, Securities Intermediary and Security Agent.

The rating on the Facility addresses the timely payment of the Base Interest Amount and Additional Payment Amount and the ultimate payment of the Outstanding Funding Amount on or before the Scheduled Maturity Date in April 2026. For the avoidance of doubt, this rating does not address the Additional Interest Amount.

The Borrower is a limited liability company incorporated under the laws of the Cayman Islands. This transaction is set up as a cash flow securitization, which will be collateralized by a portfolio of leveraged loans subject to Collateral Quality and Portfolio Profile Tests. As of the finalized rating date, the transaction portfolio consists of approximately $218.59 million of senior secured term loans to 137 unique obligors.

The Borrower will continue to draw on the Facility based on a predetermined schedule. Upon each drawing request, the Collateral Manager will comply with certain portfolio tests. The warehouse will have a reinvestment period end date in April 2019, followed by an amortization period. The warehouse will reach its maturity date at the earliest of the Collateralized Loan Obligation Closing Date, the Scheduled Maturity Date in April 2026 or the date upon which the final payment on the last of the collateral of the portfolio has been received.

An early maturity date can be caused by an Optional Early Maturity Date (no earlier than 12 months after the reinvestment period end date) at the sole option of the Instructing Party (Barclays) or by the Borrower with the consent of a majority of the LLC Members following an Event of Default. Under the Warehouse Agreement, upon an occurrence of (and during the continuation of) an Event of Default, the Instructing Party (Barclays) may also, in its sole option, elect to designate an Acceleration Date and liquidate the portfolio.

As the trades settle in the warehouse portfolio, under the drawing schedule, Barclays (as the sole Lender) will continue to fund the Facility upon the Borrower’s request. In its analysis, DBRS has considered Barclays’ ability to fund the Facilities, and it will continue to monitor the transaction as part of ongoing surveillance. Barclays Bank PLC currently has a public Issuer Rating of A (high) with a Negative trend by DBRS.

The finalized rating reflects the following primary considerations:

(1) The Warehouse Agreement dated as of April 18, 2017.

(2) The integrity of the transaction structure.

(3) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.

(4) DBRS’s assessment of the collateralized loan obligation management capabilities of Alcentra NY.

To assess portfolio credit quality, DBRS will provide a credit estimate or internal assessment for each corporate obligor not publicly rated in the portfolio. Credit estimates are not ratings; rather, they represent a primarily model-driven default probability for each obligor that is used in assigning ratings to a transaction.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating CLOs and CDOs of Large Corporate Credit, which can be found on dbrs.com under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.