Fitch Assigns Holland Park CLO Limited Expected Ratings

(Repeat for additional subscribers)

April 4 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Holland Park CLO Limited notes expected ratings, as follows:

EUR291.875m class A-1: 'AAA(EXP)sf'; Outlook Stable

EUR58.75m class A-2: 'AA(EXP)sf'; Outlook Stable

EUR30m class B: 'A+(EXP)sf'; Outlook Stable

EUR23.75m class C: 'BBB+(EXP)sf'; Outlook Stable

EUR37.5m class D: 'BB+(EXP)sf'; Outlook Stable

EUR17.5m class E: 'B-(EXP)sf'; Outlook Stable

EUR54.25m subordinated notes: not rated

The assignment of the final ratings is contingent on the receipt of final documents conforming to information already reviewed.

Holland Park CLO Limited is an arbitrage cash flow collateralised loan obligation (CLO).

KEY RATING DRIVERS

Portfolio Credit Quality

Fitch expects the average credit quality of obligors to be in the range of 'B'/'B-'. The agency has public ratings or credit opinions on all 49 obligors in the initial portfolio. The covenanted maximum Fitch weighted average rating factor (WARF) for assigning today's expected ratings is 34.0. The WARF of the initial portfolio is 31.4.

Above-average Recoveries

The portfolio will comprise a minimum of 90% senior secured obligations. Recovery prospects for these assets are typically more favourable than for second-lien, unsecured and mezzanine assets. Fitch has assigned recovery ratings (RR) to all obligations in the initial portfolio. The covenanted minimum weighted average recovery rate (WARR) for assigning today's expected ratings is 68%. The WARR of the initial portfolio is 72.6%.

Payment Frequency Switch

The notes pay quarterly while the portfolio assets can reset to a semi-annual basis. The transaction has an interest-smoothing account, but no liquidity facility. Liquidity stress for the non-deferrable class A-1 and A-2 notes, stemming from a large proportion of assets resetting to a semi-annual basis in any one quarterly period, is addressed by switching the payment frequency on the notes to semi-annual in such a scenario, subject to certain conditions.

Limited Interest Rate Risk

No more than 10% of the portfolio may consist of fixed-rate assets; consequently, the majority of this risk is naturally hedged, as all notes are floating-rate. Fitch modelled a 10% fixed-rate bucket in its analysis and the rated notes can withstand the excess spread compression in a rising interest rate environment.

Limited FX Risk

Any non-euro-denominated assets have to be hedged with perfect asset swaps as of the settlement date, limiting foreign exchange risk. The transaction is permitted to invest up to 20% of the portfolio in non-euro-denominated assets.

TRANSACTION SUMMARY

Net (Dusseldorf: NETK.DU - news) proceeds from the note issue will be used to purchase a EUR500m portfolio of European leveraged loans and bonds. The portfolio will be managed by Blackstone (NYSE: BX - news) /GSO Debt Funds Management Europe Limited. The transaction will have a four year re-investment period scheduled to end in 2018.

The transaction documents may be amended subject to rating agency confirmation or noteholder approval. Where rating agency confirmation relates to risk factors, Fitch will analyse the proposed change and may provide a rating action commentary if the change has a negative impact on the ratings. Such amendments may delay the repayment of the notes as long as Fitch's analysis confirms the expected repayment of principal at the legal final maturity.

If in the agency's opinion the amendment is risk-neutral from a rating perspective Fitch may decline to comment. Noteholders should be aware that confirmation is considered to be given if Fitch declines to comment.

RATING SENSITIVITIES

A 25% increase in the expected obligor default probability would lead to a downgrade of one to three notches for the rated notes. A 25% reduction in expected recovery rates would lead to a downgrade of one to five notches for the rated notes.

In addition, in line with its Exposure Draft - Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds, 22 January 2014, Fitch analysed a sensitivity of a 50% devaluation haircut to recovery rates for assets in these jurisdictions, assuming that recovery rates may be realised in non-euro currencies.

This sensitivity would not result in the downgrade of the class A-1 notes, the only notes affected. This sensitivity was conducted to assess transfer and convertibility risk if a country was to leave the currency union and it is consistent with the proposals of the Exposure Draft.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying pre-sale report, which will shortly be available at www.fitchratings.com.