DBRS Finalizes Provisional Ratings on Senior Funding Facility and Mezzanine Funding Facility of Buckhorn Park CLO, Ltd.

DBRS, Inc. (DBRS) finalized the following provisional ratings on the Senior Funding Facility and the Mezzanine Funding Facility (together, the Facilities) of Buckhorn Park CLO, Ltd.:

-- Senior Funding Facility due October 2027 at A (sf)
-- Mezzanine Funding Facility due October 2027 at BBB (low) (sf)

The ratings on the Facilities are being finalized pursuant to the Warehouse Agreement dated as of October 23, 2018, between Buckhorn Park CLO, Ltd. as Borrower; Barclays Bank PLC, New York Branch (Barclays) as Facility Agent; GSO/Blackstone Debt Funds Management, LLC (GSO) as Collateral Manager; the Subordinated Lenders named on the signature page thereto; and U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS) as the Collateral Administrator, Securities Intermediary and Security Agent.

The rating on the Senior Funding Facility addresses the timely payment of the Senior Base Interest Amount and the ultimate payment of Senior Funding Amounts on or before the Scheduled Maturity Date in October 2027. The rating on the Mezzanine Funding Facility addresses the ultimate payment of the Mezzanine Base Interest Amount and the ultimate payment of the Mezzanine Funding Amounts on or before the Scheduled Maturity Date in October 2027. For the avoidance of doubt, these ratings do not address the Senior Additional Interest Amount or the Mezzanine 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, there exist $79.92 million of senior-secured term loans to 51 unique obligors and the Borrower will continue to draw on the Facilities 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 2020, followed by an amortization period. The warehouse will reach its maturity date at the earliest of: the CLO Closing Date; the Scheduled Maturity Date in October 2027; 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 six months after the reinvestment period end date) or at the sole option of the Instructing Lender (Barclays) following an Event of Default (EOD). Under the Warehouse Agreement, upon an occurrence of (and during the continuation of) an EOD, the Instructing Lender (Barclays) may, in its sole option, elect to designate an Acceleration Date and liquidate the portfolio, which could adversely affect the Mezzanine Lenders and potentially affect ratings volatility on the Mezzanine Funding Facility.

The transaction contains collateral manager and subordinated lender types of EOD, which could lead to acceleration and liquidation; however, the transaction is a dual-lender facility at closing, whereby Barclays retains 100% of the rated Facilities. If, at any time, additional lenders are admitted into either rated facility, DBRS may either take a rating action or withdraw the rating on such facility at that time, subject to future amendments.

DBRS’s rating analysis does not take into account the risk of loss caused by liquidation at market prices after an EOD has occurred.

The finalized ratings reflect the following primary considerations:

(1) The Warehouse Agreement dated as of October 23, 2018.

(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 GSO’s collateralized loan obligation management capabilities.

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 the transaction.

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

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

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

For more information on this credit or on this industry, visit www.dbrs.com, or contact us at info@dbrs.com.