Black Diamond CLO 2013-1 Ltd. Ratings Raised On Three Classes; Two Ratings Affirmed


OVERVIEW
  • We raised our ratings on the class A-2-R, B-R, and C-R notes from Black Diamond CLO 2013-1 Ltd. We also removed the class A-2-R and B-R ratings from CreditWatch, where we placed them with positive implications Oct. 26, 2018.
  • We affirmed our ratings on the class A-1-R and D notes from the same transaction.
  • The upgrades reflect improved overcollateralization ratios because of senior note paydowns since our July 17, 2017, rating action.
  • The affirmed ratings reflect our belief that the credit support available is commensurate with the current rating levels.
CENTENNIAL (S&P Global Ratings) Jan. 10, 2019--S&P Global Ratings today raised 
its ratings on the class A-2-R, B-R, and C-R notes from Black Diamond CLO 
2013-1 Ltd. We also removed the class A-2-R and B-R ratings from CreditWatch, 
where we placed them with positive implications on Oct. 26, 2018. At the same 
time, we affirmed our 'AAA (sf)' and 'BB (sf)' ratings on the class A-1-R and 
D notes, respectively, from the same transaction (see list). 

Today's rating actions follow our review of the transaction's performance 
using data from the Dec. 5, 2018, trustee report.

The upgrades reflect the transaction's $112.18 million in paydowns to the 
class A-1-R notes since our July 17, 2017, rating actions. These paydowns 
resulted in improved reported overcollateralization (O/C) ratios since the 
June 7, 2017, trustee report, which we used for our previous rating actions:

  • The class A O/C ratio improved to 147.67% from 131.06%.
  • The class B O/C ratio improved to 127.79% from 119.42%.
  • The class C O/C ratio improved to 116.21% from 112.05%.
  • The class D O/C ratio improved to 108.46% from 106.85%.
The collateral portfolio's credit quality has slightly deteriorated since our 
last rating actions. Collateral obligations with ratings in the 'CCC' category 
have increased, with $20.49 million reported as of the Dec. 5, 2018, trustee 
report, compared with $11.84 million reported as of the June 7, 2017, trustee 
report. However, despite the slightly larger concentrations in the 'CCC' 
category, the transaction has benefited from a drop in the weighted average 
life due to underlying collateral's seasoning, with 3.6 years reported as of 
the Dec. 5, 2018, trustee report, compared with 4.7 years reported at the time 
of our last rating action.
 
The upgrades reflect the improved credit support at the prior rating levels; 
the affirmations reflect our view that the credit support available is 
commensurate with the current rating levels.

On a standalone basis, the results of the cash flow analysis indicated a 
higher rating on the class C-R notes. However, because of the transaction's 
increased concentration of 'CCC' rated collateral obligations, and additional 
sensitivity runs that considered the presence of assets trading at distressed 
prices, we limited the upgrade on this class to offset future potential credit 
migration in the underlying collateral. 

Our review of this transaction included a cash flow analysis, based on the 
portfolio and transaction as reflected in the aforementioned trustee report, 
to estimate future performance. In line with our criteria, our cash flow 
scenarios applied forward-looking assumptions on the expected timing and 
pattern of defaults, and recoveries upon default, under various interest rate 
and macroeconomic scenarios. In addition, our analysis considered the 
transaction's ability to pay timely interest and/or ultimate principal to each 
of the rated tranches. The results of the cash flow analysis--and other 
qualitative factors as applicable--demonstrated, in our view, that all of the 
rated outstanding classes have adequate credit enhancement available at the 
rating levels associated with these rating actions.

We will continue to review whether, in our view, the ratings assigned to the 
notes remain consistent with the credit enhancement available to support them, 
and will take rating actions as we deem necessary.

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