KBRA assigns preliminary ratings to three classes of notes issued by Logan CLO III, Ltd. (Logan III), a cash flow collateralized loan obligation (CLO) backed by a diversified portfolio of broadly syndicated corporate loans.
Logan III is managed by Elmwood Asset Management LLC (“Elmwood” or the “collateral manager). The deal will have a 4.9-year reinvestment period. The legal final maturity is on April 21, 2035. The ratings reflect initial credit enhancement levels, excess spread, and coverage tests including overcollateralization ratio and interest coverage tests.
The collateral in Logan III will mainly consist of broadly syndicated leveraged loans issued by corporate obligors diversified across sectors. The total portfolio par amount is $500.0 million with exposure close to 300 obligors. The obligors in the portfolio have a K-WARF of 2301, which represents a weighted average portfolio credit assessment of approximately B. KBRA has also considered the potential for near to medium term negative portfolio credit deterioration and the transactions sensitivity to macroeconomic shocks like that seen during the COVID-19 pandemic.
Elmwood Asset Management LLC (“Elmwood”) is owned by funds managed by Elliott Investment Management L.P. and its affiliates and Elmwood’s management. Incorporated in May 2018, Elmwood has $9.9 billion of assets under management across 17 U.S. CLOs as of March 2022. Elmwood focuses on long-only investment strategies in performing credit with an emphasis in the broadly syndicated loan market.
The preliminary rating on the Class A Notes considers the timely payment of interest and ultimate payment of principal by the applicable stated maturity date, while the preliminary ratings on the Class D and E Notes consider the ultimate payment of interest and principal.
KBRA analyzed the transaction using the Structured Credit Global Rating Methodology, the Global Structured Finance Counterparty Methodology, and the ESG Global Rating Methodology.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
Jerry Jurcisin, Associate Director (Lead Analyst)
+1 (646) 731-2457
Steven Zheng, CFA, Associate Director
+1 (646) 731-3379
Sean Malone, CFA, Managing Director
+1 (646) 731-2436
Eric Hudson, Senior Managing Director (Rating Committee Chair)
+1 (646) 731-3320
Business Development Contact
Jason Lilien, Managing Director
+1 (646) 731-2442