KBRA Europe Assigns Preliminary Ratings to Vendome Funding DAC

Kroll Bond Rating Agency Europe Limited (KBRA) assigns preliminary ratings to six classes of notes to be issued by Vendome Funding DAC, a cash flow collateralised loan obligation (CLO) back by a diversified portfolio of Euro-denominated corporate loans. To note, the name of the Issuer is expected to change to Vendome Funding CLO 2020-1 DAC prior to the closing date.

Vendome Funding DAC is the inaugural CLO for CBAM CLO Management Europe LLC ("CBAM Europe" or the "collateral manager"). The CLO will have a 1-year reinvestment period and the legal final maturity is 20 Jul 2031. The ratings reflect initial credit enhancement levels, coverage tests including par value and interest coverage tests, excess spread, and a reinvestment overcollateralisation test.

The collateral in Vendome Funding DAC will mainly consist of broadly syndicated leveraged loans issued by corporate obligors diversified across sectors. The obligors in the portfolio have a K-WARF of 2354, which represents a weighted average portfolio assessment of approximately B. The target portfolio par amount is ?350.0 million with exposures to 96 obligors.

CBAM Europe was established in 2020 as a fully owned subsidiary of CBAM Partners, LLC ("CBAM US"), which was formed in 2016. CBAM US is an alternative investment management firm founded in 2016 which currently has $12 billion in assets under management across 11 reinvesting CLOs. Through a supply and services agreement, the CBAM Europe platform will benefit from the credit research as and support functions of CBAM US. The founders of CBAM US and newly hired CBAM Europe management team have extensive experience managing CLOs and corporate credit.

The social and economic fallout from the novel coronavirus (COVID-19) pandemic will impact different corporate sectors to varying degrees but broadly, we expect intense pressure on certain cyclical and other non-defensive sectors, with the adverse effects broadening and deepening as the economic dislocation continues. To address this, KBRA considered several scenarios to assess the impact of potential credit migration due to COVID-19.

The preliminary ratings on the Class A, B-1 and B-2 Notes consider the timely payment of interest and ultimate payment of principal by the applicable stated maturity date, while its ratings on the Class C, D, and E notes consider the ultimate payment of interest and principal.

KBRA analysed the transaction using Structured Credit Global Rating Methodology published on 13 March 2020 and the and the Global Structured Finance Counterparty Methodology published on August 8, 2018.

Click here to view the report. To access ratings and relevant documents, click here.

Related Publications

• KBRA's Structured Credit 101: Collateralized Loan Obligations
• KBRA's Structured Credit 401: Primer on Combination Notes
• Global Structured Credit Rating Methodology
• Par Wars: Attack on the Loans

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the EU Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the EU Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA Europe

KBRA Europe is a full-service credit rating agency (CRA) registered with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency, Inc. (KBRA) is a CRA registered as an NRSRO with the U.S. Securities and Exchange Commission and is a certified CRA with ESMA. KBRA is also recognized by the U.S. National Association of Insurance Commissioners as a Credit Rating Provider and is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.