Moody's Downgrades Ratings on Marble Point CLO XXIII Ltd. Notes

Strategic Insights -

Moody's Investors Service has recently downgraded the ratings on certain notes issued by Marble Point CLO XXIII Ltd., a managed cash-flow CLO that collateralizes a portfolio of broadly syndicated senior secured corporate loans. The downgrade action on the Class E notes reflects the specific risks posed by par loss observed in the underlying CLO portfolio. Despite this, the ratings on other notes remain unchanged due to expected losses remaining commensurate with their current ratings. This decision is based on Moody's comprehensive review of all credit ratings for the respective transaction, conducted during a rating committee.

Key Takeaways:

  • The ratings on the Class E notes, U.S.$15,000,000 Class E Junior Deferrable Floating Rate Notes due 2035, were downgraded to B1 (sf) from Ba3 (sf) due to par loss observed in the underlying CLO portfolio.
  • The total collateral par balance, including recoveries from defaulted securities, is $491.1 million, which is $8.9 million less than the $500 million initial par amount targeted during the deal's ramp-up.
  • The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans.
  • The transaction's reinvestment period will end in January 2027.
  • The expected losses on other notes, such as Class A-1, Class A-2, Class B-1, Class B-2, Class C-1, Class C-2, Class D-1, and Class D-2, remain commensurate with their current ratings.
  • The downgrade action was based on the specific risks posed by par loss observed in the underlying CLO portfolio, which was not the case for other notes.
  • The Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations," was used in modeling the transaction.
  • Weighted Average Rating Factor (WARF), Diversity Score, Weighted Average Spread (WAS), and Weighted Average Recovery Rate (WARR) were key inputs in the analysis.

Statistics:

  • Total collateral par balance: $491.1 million
  • Less than initial par amount: $8.9 million
  • Initial par amount: $500 million
  • Weighted Average Rating Factor (WARF): 2892
  • Weighted Average Spread (WAS): 3.04% (before accounting for reference rate floors)
  • Weighted Average Recovery Rate (WARR): 46.14%
  • Weighted Average Life (WAL): 5.46 years

Sources:

  • Moody's Ratings (Moody's) - news release
  • "Moody's Global Approach to Rating Collateralized Loan Obligations" - published in May 2024 (https://ratings.moodys.com/rmc-documents/420962)