KBRA UK has assigned preliminary ratings to six classes of refinancing notes issued by RRE 3 Loan Management DAC, a collateralised loan obligation (CLO) backed predominantly by a diversified portfolio of Euro-denominated corporate loans. The transaction, managed by Redding Ridge Asset Management (UK) LLP (RRAM UK), marks a reset of the original CLO that first closed in November 2019.
The refinancing will bring changes to key terms, including the CLO’s stated maturity, non-call period, reinvestment period, and the interest rates on the notes. The transaction also involves adjusting the notional balances and using proceeds from the new issuance to redeem the outstanding notes fully. Additionally, new assets will be acquired for the portfolio as part of the reset.
RRE 3 Loan Management DAC’s new structure includes a 4.7-year reinvestment period and a 15-year legal maturity. The total target portfolio value is €425 million, comprising exposures to 142 different corporate obligors across various sectors. The portfolio’s K-WARF score, a metric used to assess the credit quality of a CLO portfolio, stands at 2529, which corresponds to a weighted average credit assessment of approximately B.
RRAM UK, a subsidiary of Redding Ridge Asset Management LLC, was established in 2016 and seeded by Apollo Global Credit Management, LLC. The asset management firm focuses on CLOs and currently oversees more than €7.7 billion in assets across 17 European CLOs.
The ratings assigned by KBRA reflect several key factors. For Class A-1-R and A-2-R Notes, the rating agency considers the timely payment of interest and the eventual repayment of the principal by the final maturity date. Meanwhile, for the Class B-R, C-1-R, C-2-R, and D-R Notes, the ratings take into account the eventual repayment of both interest and principal.
KBRA’s ratings also consider the initial credit enhancement levels, which provide protection to noteholders. Other key metrics that influenced the ratings include par value and interest coverage tests, as well as the excess spread, and a reinvestment overcollateralisation test.
The collateral manager for the CLO, RRAM UK, has a well-established track record in managing such portfolios. Since its inception, the firm has become a significant player in the European CLO market, managing a broad range of assets for institutional clients.
As the CLO industry continues to evolve, the reset of RRE 3 Loan Management DAC’s terms is a move in line with current market trends, providing investors with revised opportunities while maintaining a diversified portfolio of corporate loans. The reset aims to enhance the portfolio’s structure while continuing to ensure robust returns for noteholders. To access rating and relevant documents, click here.