Moody's Investors Service said today that issuer Cairn CLO III B.V.'s intention to amend the portfolio profile tests of its portfolio management agreement will not result in a rating downgrade or withdrawal on the collateralized loan obligation notes.

The €300 million ($396 million) deal, issued in February and managed by Cairn Capital, was the first CLO that came to the European market after the financial crisis. 

Cairn wants to change the portfolio management agreement to boost to 10% from 7% the maximum allowed proportion of portfolio assets of corporate obligors domiciled in countries that have long-term issuer ratings below A3.

On Aug. 14, the agency released a request for comment called "Moody's Approach to Capturing Country Risk in CLOs," which specifically addresses country risk in multi-country CLOs.

The issue's current proposal involving a 10% exposure to countries with a local currency ceiling between A1 and A3, which is the issuer's proposed portfolio composition limit, will have no impact on the assigned ratings.

Moody's said its opinion only pertains to the proposal's credit impact, and it does not express an opinion on whether it has other non-credit related effects that might have a negative effect on noteholder interests.

However, Moody's will continue to monitor the rating on the issuer's notes.

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