The Bain Capital Credit CLO 2021-2 trust is floating secured and subordinated notes that will provide financing on first-lien, senior secured leveraged loans.
That the portfolio is made up entirely of first-lien secured loans with a weighted average recovery assumption of 75.15 percent is one rating positive, in the eyes of FitchRatings. The notes have an expected maturity date of July 2034.
In an overall sense, the deal also benefits from FitchRatings’ outlook on the CLO sector, and acknowledges economic uncertainty that might stem from the pandemic and how it might impact global markets.
The company’s U.S. corporate ratings team lowered the 2021 default forecast for U.S. leveraged loan defaults, also its observed conversion rate of notes with a negative outlook to notes that are actually downgraded has decreased.
Computer and electronics, business services and banking and finance industries make up 39 percent of Bain Capital’s portfolio composition, and Fitch looked positively on that diversity and composition of the portfolio as well. The top five obligors represent up to 12.5 percent of the portfolio balance.
While performing its cashflow analysis, Fitch found that the class A-1 notes can tolerate default rates up to 60.3 percent, with an assumed recovery rate of 36.5 percent in its ‘AAA’ scenario.
In taking a closer look at the assets, Fitch found that 41 percent of the whole 2021-2 Bain Capital deal had a weighted average rating of ‘B’, which is considered of speculative quality. The next biggest rating contribution was ‘B+’ at just over 20 percent. This is considered a rating negative, which Fitch says is in line with previous CLOs.
The percent of assets in the indicative portfolio with ratings of less than ‘CCC+’ was just 2.6 percent. None of the loans had previously defaulted.
The CLO manager will be Bain Capital Credit U.S. CLO Manager, LLC, while the Bank of New York Mellon Trust Company will serve as the trustee and Barclays Capital acted as the arranger.
The $246 million class A-1 notes have a rating of ‘AAA’.
