Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for “Newfoundland CLO I Limited” on 26 October 2022. The credit ratings remain as follows:

Class A-1 Senior Secured Floating Rate Notes due 2039: USD 5,864,000,000: rated AAA_SF (ISIN XS0402206154 / US651343AB11)

Class A-2 Senior Secured Floating Rate Notes due 2039: USD 2,136,000,000: rated AAA_SF (ISIN XS0418594403 / US651343AC93)

Class B-1 Mezzanine Secured Floating Rate Notes due 2039: USD 616,250,000: rated A+_SF (ISIN XS1882681882 / US651343AE59)

Class B-2 Mezzanine Secured Floating Rate Notes due 2039: USD 483,750,000: rated A+_SF (ISIN XS1882681965 / US651343AF25)

Class C-1 Subordinated Notes due 2039: USD 700,000,000: not rated

Class C-2 Subordinated Notes due 2039: USD 700,000,000: not rated

Newfoundland CLO I Limited is a true-sale cash securitisation of a portfolio of corporate loans denominated in multiple currencies. The loans were granted by Barclays Bank PLC to corporate borrowers located primarily in North America and Europe. The portfolio collateralises two pari-passu senior notes (classes A-1 and A-2), two pari-passu mezzanine notes (classes B-1 and B-2) and two pari-passu subordinated notes (classes C-1 and C-2) denominated in US dollars. The transaction closed on 26 November 2008 and was last restructured on 17 February 2021. Legal maturity is on 26 November 2039.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Scope’s review was based on the latest available investor reporting and portfolio information. As of 26 September 2022, the portfolio comprised 1067 loans from 399 obligors. The average default risk of the portfolio is commensurate with a BB rating, based on mapping between Barclays’ default grades of loans in the portfolio and Scope’s ratings.

Credit-positive

Credit enhancement (positive). The class A-1/A-2 and B-1/B-2 notes continue to benefit from 23.8% and 13.3% subordination, respectively, and are protected by overcollateralisation tests.

Overcollateralisation test (positive). The overcollateralisation and minimum excess spread reserve tests help to maintain the proper collateralisation of the notes with performing collateral. Upon a breach of the overcollateralisation test, principal and interest proceeds from the portfolio are diverted to repay the senior notes. Upon a breach of the excess spread reserve test, interest proceeds are reinvested in eligible collateral. The Senior Par Value Test (class A-1/A-2) was reported at 131.25% above the required 125.0% and the Excess Spread Reserve Test stood at 131.25% above the required 130.56% as per last reviewed investor report (September 2022).

Swap (positive). A swap mitigates any risk from currency mismatches between portfolio assets and the issued notes. The swap also promises three-month USD Libor plus 2.8% on a notional balance of USD 10.5bn, to be paid quarterly to the issuer.

Credit-negative

Low recovery rates (negative). The portfolio generally comprises senior unsecured exposures, which could result in low expected recoveries upon default.

Geography and industry portfolio concentration (negative). 76.1% of the portfolio consists of US obligors and 33.7% has classifications under the Moody’s financial services industry categories. Concentrations may further increase because: i) the transaction’s priority levels favour obligors incorporated in North America; and ii) the single largest industry exposure limit is 45%.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 17 December 2021; Counterparty Risk Methodology, 14 July 2022; SME ABS Rating Methodology, 16 May 2022) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Guang Yang, Analyst

Potential conflicts
See www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings. One of the General Managers of Scope Ratings, who joined the organisation on 1 December 2021, has a significant relationship with an affiliate of Deutsche Bank AG, a related third party to this transaction.

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