Fitch Affirms 4 & Upgrades 3 Classes of Emporia Preferred Funding III,
NEW YORK -- January 10, 2013
Fitch Ratings has affirmed four and upgraded three classes of notes issued by
Emporia Preferred Funding III, Ltd./Corp. (Emporia III) as follows:
--$100,000,000 class A-1 notes at 'AAAsf'; Outlook Stable;
--$40,000,000 class A-2 notes at 'AAAsf'; Outlook Stable;
--$132,580,000 class A-3 notes at 'AAAsf'; Outlook Stable;
--$26,845,000 class B notes at 'AAsf'; Outlook Stable;
--$37,170,000 class C notes upgraded to 'Asf' from 'BBBsf'; Outlook Stable;
--$20,650,000 class D notes upgraded to 'BBsf' from 'Bsf'; Outlook to Positive
--$18,585,000 class E notes upgraded to 'Bsf' from 'CCCsf'; assigns Outlook
The rating actions reflect the increased stability in credit quality of the
underlying loan portfolio. The amount of performing assets Fitch considers
rated 'CCC+' or below has decreased to 6.2% from 9.9% in January 2012. Fitch
currently considers the weighted average rating of the $340.7 million (as of
Dec. 2, 2012 trustee report) performing portfolio to be 'B/B-', within the
same rating category as the portfolio in January 2012.
This review was conducted under the framework described in the report 'Global
Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for
projecting future default and recovery levels for the underlying portfolio.
These default and recovery levels were then utilized in Fitch's cash flow
model under various default timing and interest rate stress scenarios, as
described in the report 'Global Criteria for Cash Flow Analysis in CDOs'.
While Fitch's cash flow analysis indicates higher passing rating levels for
the class B, C, D and E notes, the current ratings appropriately reflect the
risk profile of the remaining portfolio. These classes of notes remain
subordinate to the class A-1, A-2 and A-3 notes (collectively, class A) and
will not receive any principal proceeds until the more senior tranches are
paid in full. Based on the maturity profile of the remaining portfolio, class
A is not expected to pay in full within the next one to two years. Since the
class C, D and E notes receive interest and principal subordinate to
satisfaction of the class A/B coverage tests, Fitch applied a ratings cap to
these classes. The application of a cap under Fitch's 'Criteria for Rating
Caps in Global Structured Finance Transactions' reflects the additional risk
to the class C, D and E notes given their ability to defer interest payments.
Emporia III is a cash flow collateralized loan obligation (CLO) that closed on
March 15, 2007 and is managed by Ivy Hill Asset Management, a portfolio
management company of Ares Capital Corporation. Emporia III has a revolving
portfolio primarily composed of U.S. middle market loans, approximately 93.7%
of which are senior secured positions and approximately 6.3% of which are
second lien loans and structured finance assets. The transaction remains in
its reinvestment period through April 2013.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
The information used to assess these ratings was sourced from the asset
manager, periodic servicer reports, note valuation reports and the public
Applicable Criteria & Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2012);
--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012);
--'Criteria for Rating Caps in Global Structured Finance Transactions' (Aug.
--'Criteria for Interest Rate Stresses in Structured Finance Transactions'
(March 20, 2012).
Applicable Criteria and Related Research:
Global Criteria for Cash Flow Analysis in CDOs
Global Rating Criteria for Corporate CDOs
Global Structured Finance Rating Criteria
Criteria for Interest Rate Stresses in Structured Finance Transactions
Criteria for Rating Caps in Global Structured Finance Transactions
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Primary Surveillance Analyst
Aaron Hughes, +1-312-368-2074
70 West Madison Street
Chicago, IL 60602
Derek Miller, +1-312-368-2076
Sandro Scenga, New York, +1-212-908-0278
Press spacebar to pause and continue. Press esc to stop.