Moody's Downgrades Ratings on Symphony CLO XIX's Class F Notes

Strategic Insights -

Moody's Investors Service has announced a rating downgrade on the U.S.$10,000,000 Class F Junior Secured Deferrable Floating Rate Notes due 2031 issued by Symphony CLO XIX, Ltd. The notes, which were originally issued in April 2018, are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The downgrade reflects the specific risks to the junior notes posed by par loss and credit deterioration observed in the underlying CLO portfolio.

Key Takeaways:

  • Moody's downgraded the ratings on the Class F Notes to Caa3 (sf) from Caa2 (sf) due to par loss and credit deterioration in the underlying CLO portfolio.
  • The transaction has incurred par losses of approximately $5.2 million since August 2024.
  • The weighted average rating factor (WARF) has been deteriorating and is currently 3329 compared to 3298 in August 2024, failing the trigger of 2978.
  • The Class F Notes are junior secured deferrable floating rate notes due 2031 with a principal amount of $10 million.
  • The transaction's reinvestment period ended in April 2023.
  • The CLO's performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change.
  • The Manager's investment decisions and management of the transaction will also affect the performance of the rated notes.

Statistics:

  • Par losses since August 2024: approximately $5.2 million
  • Weighted average rating factor (WARF): currently 3329, compared to 3298 in August 2024
  • Par haircut in OC tests and interest diversion test: 1.37%
  • Weighted Average Spread (WAS): 3.21%
  • Weighted Average Recovery Rate (WARR): 46.99%
  • Par proceeds balance: $349,282,091
  • Defaulted par: $11,486,697
  • Diversity Score: 68
  • Weighted Average Life (WAL): 3.45 years

Sources:

  • "Moody's Ratings" (Moody's)
  • "Moody's Global Approach to Rating Collateralized Loan Obligations" (Moody's, published in May 2024) [1]
  • https://ratings.moodys.com/rmc-documents/420962
  • https://ratings.moodys.com