Sign in Subscribe
Moody's Investors Service Inc.

Moody's Upgrades Ratings on LCM Loan Income Fund I Ltd. Notes

Strategic Insights

— 2 min read

Moody's Investors Service has recently upgraded the ratings on the Class B Senior Floating Rate Notes and Class C Deferrable Mezzanine Floating Rate Notes issued by LCM Loan Income Fund I Ltd. The upgrading of these ratings is primarily attributed to the significant deleveraging of the senior notes and an increase in the transaction's over-collateralization (OC) ratios since May 2024. LCM Loan Income Fund I Ltd., a managed cash-flow CLO, was originally issued in March 2018 and is primarily collateralized by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in April 2023.

Key Takeaways:

  • The Class B Senior Floating Rate Notes due 2031 have been upgraded to Aaa (sf) from Aa1 (sf) due to the significant deleveraging of the senior notes, which have been paid down by approximately 60.45% or $64.2 million since May 2024.
  • The Class C Deferrable Mezzanine Floating Rate Notes due 2031 have been upgraded to Aa1 (sf) from A1 (sf) due to the increase in over-collateralization (OC) ratios for the senior notes and Class C, which are reported at 162.42% and 146.96%, respectively, versus May 2024 levels of 137.96% and 130.95%, respectively.
  • The ratings upgrade is primarily a result of the transaction's over-collateralization and deleveraging, which has significantly improved the credit quality of the underlying portfolio.
  • The transaction's reinvestment period ended in April 2023, and the manager's investment decisions and management of the transaction will also affect the performance of the rated notes.
  • A comprehensive review of all credit ratings for the respective transaction has been conducted during a rating committee using a cash flow model based on the Binomial Expansion Technique.

Statistics:

  • The Class B Senior Floating Rate Notes due 2031 have been upgraded from Aa1 (sf) to Aaa (sf) after being paid down by approximately 60.45% or $64.2 million since May 2024.
  • The Class C Deferrable Mezzanine Floating Rate Notes due 2031 have been upgraded from A1 (sf) to Aa1 (sf) after being reported at 146.96% in over-collateralization (OC) ratios in May 2025.
  • The OC ratios for the senior notes and Class C, respectively, are reported at 162.42% and 146.96% in May 2025 versus May 2024 levels of 137.96% and 130.95%, respectively.
  • The transaction's weighted average recovery rate (WARR) is 46.33%, and the weighted average spread (WAS) is 3.39%.
  • The par haircut in OC tests and interest diversion test is 2.91%.

Sources:

  • Moody's Global Approach to Rating Collateralized Loan Obligations, published in May 2024, available at https://ratings.moodys.com/rmc-documents/420962
  • Moody's Global Approach to Rating Collateralized Loan Obligations, published in May 2024, available at https://ratings.moodys.com for a copy of this methodology
  • Moody's Ratings document, dated May 2025, reporting OC ratios for the senior notes and Class C, respectively.

Read more