Ratings Raised On Four Classes From OFSI Fund VI Ltd. And Removed From CreditWatch Positive; Two Ratings Affirmed

  • We raised our ratings on OFSI Fund VI Ltd.'s class A-2R, B-R, C-R, and D notes and removed them from CreditWatch positive.
  • We also affirmed our ratings on the class A-1R and E notes.
  • The upgrades reflect the transaction's improved overcollateralization ratios due to senior note paydowns since March 2018.
  • The affirmations reflect our belief that the credit support levels available are commensurate with the current ratings.
CENTENNIAL (S&P Global Ratings) Feb. 22, 2019--S&P Global Ratings today raised 
its ratings on four classes from OFSI Fund VI Ltd. and removed them from 
CreditWatch, where we had placed them with positive implications on Dec. 20, 
2018. At the same time, we affirmed our ratings on two classes from the 
transaction (see list.)

Today's rating actions follow our review of the transaction's performance 
using data from the Jan. 3, 2019, trustee report.

The upgrades reflect the transaction's $178.45 million collective paydowns to 
the class A-1R notes since our March 2018 rating actions (see "Ratings 
Assigned To Four Classes From OFSI Fund VI Ltd. In Connection With Refinancing,
" published March 1, 2018). These paydowns resulted in improved reported 
overcollateralization (O/C) ratios since the Jan. 3, 2018, trustee report, 
which we used for our previous rating actions:
  • The class A O/C ratio improved to 180.19% from 131.75%,
  • The class B O/C ratio improved to 140.01% from 119.12%,
  • The class C O/C ratio improved to 121.50% from 111.80%,
  • The class D O/C ratio improved to 111.44% from 107.29%, and
  • The class E O/C ratio improved to 104.34% from 103.86%.
The collateral portfolio's credit quality has deteriorated since our March 
2018 rating actions. Collateral obligations with ratings in the 'CCC' category 
have increased, with $21.94 million reported as of the January 2019 trustee 
report, compared with $15.96 million reported as of the January 2018 trustee 
report. The transaction's 'CCC' exposure remains elevated at more than 11.5% 
of the aggregate collateral balance.

As a result of amortization in the underlying collateral, the portfolio has 
become more concentrated, comprising 242 assets from 86 obligors--an increase 
209 assets but a decline from 156 obligors. In addition, the weighted average 
spread declined to 3.49% from 3.77%.

The upgrades also reflect the improved credit support at the prior rating 
levels due to senior note paydowns, and 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 higher 
ratings on the class C-R and D notes. However, given the portfolio's 
heightened exposure to 'CCC' rated and defaulted collateral obligations, 
assets trading at distressed prices, obligor concentration, decline in 
weighted average spread, and par loss, we limited the upgrade on the class C-R 
and D notes to offset future potential credit migration in the underlying 
collateral and increased concentration risk as the assets mature or prepay.

Although our cash flow results indicated lower ratings for the class E notes, 
we considered the transaction's improvements in terms of 
overcollateralization. We do not believe these tranches are currently 
vulnerable to nonpayment or dependent on favorable market conditions to be 
fully repaid. However, additional deterioration in credit quality or weighted 
average spread could lead to potential negative rating actions on the notes in 
the future.

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 economic 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 we will take further rating actions as we deem necessary.
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