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 Fitzroy 2018-1 CLO DAC on 10 July 2023. The credit ratings remain as follows:

Class A (CLN) (ISIN: XS1883988476), GBP 502.0m outstanding: AA-_SF

Tranche A (CPD), GBP 502.0m outstanding: AAA_SF

Tranche B (CPD), GBP 33.5m outstanding: AA_SF

Tranche C (CPD), GBP 40.2m outstanding: A-_SF

Tranche D (CPD), GBP 26.8m outstanding: BBB-_SF

Tranche E (CPD), GBP 33.5m outstanding: BB_SF

The review was conducted based on available quarterly investor reports and loan tapes reflecting performance up to June 2023 payment date.

Fitzroy 2018-1 CLO DAC (the transaction / the issuer) is a synthetic securitisation of project finance exposures originated in UK and other EU countries by Santander UK Corporate Bank. The initial GBP 1,115m reference portfolio was subject to a 3-year revolving period, which ended on 1 October 2021. The initial portfolio comprised 97 loans secured by 76 underlying projects in renewable energy, PPP/PFI, utilities, and other infrastructure. The transaction features six credit protection deed (CPD) tranches – Tranches A to F – whereby Banco Santander S.A., London Branch (Santander) buys credit protection from the issuer.

The issuer has also issued six classes of credit linked notes (CLNs) to fully collateralise the CPD tranches. Each class of CLNs references the credit performance of the corresponding tranche defined in the credit protection deed that the issuer has entered into with Santander. The transaction closed on 27 September 2018.

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

The portfolio has amortised to 60% of initial reference portfolio notional amount. The credit enhancements on the rated tranches A to E are 25%, 20%, 14%, 10% and 5% respectively, and unchanged due to the pro-rata payment structure. The transaction features subordination events to switch from pro-rata amortisation to sequential amortisation if cumulative loss ratio exceeds 1.6% of initial reference portfolio notional amount or if the effective number of loans is less than 15, among other triggers. Scope has also approximated the latter trigger in its quantitative modelling for the purposes of this review.

No defaults or credit events (positive). The transaction has recorded no loss in the portfolio. Portfolio composition and credit quality are also stable since closing.

Shorter weighted average life (positive). Portfolio’s remaining weighted average life (5.9 years) is shorter, thus assumed lifetime default rate is lower than the assumptions at closing. The portfolio has also been amortising faster than our expectations. Amortisation of the assets with longer maturities or improvement of the portfolio composition might positively affect the ratings.

Increased concentration (negative). Effective number of loans is 39, therefore the pool is more concentrated than closing. This is mitigated by the well-managed top borrower concentration of 5%. Unproportionate increases in the portfolio concentration might negatively affect the ratings.

Counterparty risk (negative). The transaction’s counterparty risk is unchanged, as well as the Class A’s (CLN) rating since it is limited by the excessive counterparty exposure.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 25 January 2023; Counterparty Risk Methodology, 14 July 2022; CLO Rating Methodology, 28 April 2023; General Project Finance Rating Methodology, 16 November 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 Mirac Ugur, Analyst

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