articles Ratings /ratings/en/research/articles/231206-neuberger-berman-loan-advisers-euro-clo-5-dac-european-cash-flow-reset-notes-assigned-ratings-12929074 content esgSubNav
Discover more about S&P Global’s offerings
Register Reset Password
    In This List
    NEWS

    Neuberger Berman Loan Advisers Euro CLO 5 DAC European Cash Flow Reset Notes Assigned Ratings
    COMMENTS

    Weekly European CLO Update

    COMMENTS

    Scenario Analysis: Private Credit Is Insulated But Not Immune From Tariff Risk

    COMMENTS

    U.S. Auto Loan ABS Tracker: March 2025 Performance

    COMMENTS

    Global Tariff Tracker: Rating Actions As Of May 2, 2025


    Neuberger Berman Loan Advisers Euro CLO 5 DAC European Cash Flow Reset Notes Assigned Ratings

    Ratings
    Class Rating Amount (mil. €) Subordination (%) Interest rate**
    A-R AAA (sf) 183.00 39.00 Three/six-month EURIBOR plus 1.74%
    B-1-R AA (sf) 24.50 27.50 Three/six-month EURIBOR plus 2.45%
    B-2-R AA (sf) 10.00 27.50 6.50%
    C-R A (sf) 17.30 21.73 Three/six-month EURIBOR plus 3.35%
    D-R BBB- (sf) 20.20 15.00 Three/six-month EURIBOR plus 5.35%
    E-R BB- (sf) 12.00 11.00 Three/six-month EURIBOR plus 7.67%
    F-R B- (sf) 10.50 7.50 Three/six-month EURIBOR plus 9.18%
    Sub NR 25.00 N/A N/A
    *The ratings assigned to the class A-R, B-1-R, and B-2-R notes address timely interest and ultimate principal payments. The ratings assigned to the class C-R, D-R, E-R, and F-R notes address ultimate interest and principal payments.

    **The payment frequency switches to semiannual and the index switches to six-month EURIBOR when a frequency switch event occurs. EURIBOR--Euro Interbank Offered Rate. NR--Not rated. N/A--Not applicable.

    Overview

    • Neuberger Berman Loan Advisers Euro CLO 5 DAC is a European cash flow CLO securitization of a revolving pool, comprising euro-denominated senior secured loans and bonds issued mainly by sub-investment grade borrowers. Neuberger Berman Europe Ltd. manages the transaction.
    • We have assigned our ratings to the class A-R, B-1-R, B-2-R, C-R, D-R, E-R, and F-R reset notes.
    • This transaction is a reset of the already existing transaction. The existing classes of notes were fully redeemed with the proceeds from the issuance of the replacement notes on the reset date.
    • The ratings reflect our view of the transaction's diversified collateral pool, credit enhancement, and legal structure, among other factors.

    LONDON (S&P Global Ratings) Dec. 6, 2023--S&P Global Ratings today assigned its credit ratings to Neuberger Berman Loan Advisers Euro CLO 5 DAC's class A-R, B-1-R, B-2-R, C-R, D-R, E-R, and F-R notes. The issuer will also issue unrated subordinated notes (see list).

    At closing, the issuance proceeds of the refinancing notes were used to redeem the refinanced notes and pay fees and expenses incurred in connection with the reset.

    This is a European cash flow CLO transaction, securitizing a pool of primarily syndicated senior secured loans or bonds. The portfolio's reinvestment period ends approximately 4.62 years after closing, and the portfolio's maximum average maturity date is seven years after closing.

    Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following this, the notes will switch to semiannual payment.

    We consider that the portfolio is well-diversified, primarily comprising broadly syndicated speculative-grade senior secured term loans and senior secured bonds. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow CDOs (see "Global Methodology And Assumptions For CLOs And Corporate CDOs," published on June 21, 2019).

    Portfolio benchmarks
    Current
    S&P Global Ratings weighted-average rating factor 2689.43
    Default rate dispersion 574.75
    Actual Weighted-average life (years) 4.25
    Obligor diversity measure 127.10
    Industry diversity measure 22.14
    Regional diversity measure 1.30

    Transaction key metrics
    Current
    Total par amount (mil. €) 300
    Defaulted assets (mil. €) 0
    Number of performing obligors 161
    Portfolio weighted-average rating derived from our CDO evaluator B
    'CCC' category rated assets (%) 0.92
    Actual 'AAA' weighted-average recovery (%) 36.90
    Actual Weighted-average spread net of floors (%) 4.00

    In our cash flow analysis, we modeled the €300 million target par amount, the covenanted weighted-average spread of 3.90%, the covenanted weighted-average coupon of 4.25%, and the covenanted weighted-average recovery rates for all rated notes. We applied various cash flow stress scenarios, using four different default patterns, in conjunction with different interest rate stress scenarios for each liability rating category.

    Following the application of our structured finance sovereign risk criteria, we consider the transaction's exposure to country risk to be limited at the assigned ratings, as the exposure to individual sovereigns does not exceed the diversification thresholds outlined in our criteria (see "Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions," published on Jan. 30, 2019).

    The transaction's documented counterparty replacement and remedy mechanisms adequately mitigate its exposure to counterparty risk under our current counterparty criteria (see "Counterparty Risk Framework: Methodology And Assumptions," published on March 8, 2019).

    The transaction's legal structure is bankruptcy remote, in line with our legal criteria (see "Structured Finance: Asset Isolation And Special-Purpose Entity Methodology," published on March 29, 2017).

    Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe that our ratings are commensurate with the available credit enhancement for the class A-R, B-1-R, B-2-R, C-R, D-R, E-R, and F-R notes. Our credit and cash flow analysis indicates that the available credit enhancement for the class B-1-R to E-R notes is commensurate with higher ratings than those assigned. However, as the CLO will have a reinvestment period, during which the transaction's credit risk profile could deteriorate, we have capped our assigned ratings on these notes.

    In addition to our standard analysis, to indicate how rising pressures among speculative-grade corporates could affect our ratings on European CLO transactions, we have also included the sensitivity of the ratings on the class A-R to E-R notes in four hypothetical scenarios. The results are shown in the chart below.

    image

    As our ratings analysis makes additional considerations before assigning ratings in the 'CCC' category, and we would assign a 'B-' rating if the criteria for assigning a 'CCC' category rating are not met, we have not included the above scenario analysis results for the class F-R notes.

    Related Criteria

    Related Research

    Primary Credit Analyst:Sandeep Chana, London + 44 20 7176 3923;
    sandeep.chana@spglobal.com
    Secondary Contact:Emanuele Tamburrano, London + 44 20 7176 3825;
    emanuele.tamburrano@spglobal.com
    Research Contributor:Tejas Parab, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

    No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

    Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

    To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

    S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

    S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.

     

    Create a free account to unlock the article.

    Gain access to exclusive research, events and more.

    Already have an account?    Sign in