OREANDA-NEWS. S&P Global Ratings today assigned its preliminary credit ratings to Adagio V CLO Designated Activity Company's (Adagio V CLO) class A, B, C, D, E, and F notes. At closing, Adagio V CLO will also issue an unrated subordinated class of notes (see list below).

Adagio V CLO is a cash flow collateralized loan obligation (CLO) transaction securitizing a portfolio of primarily broadly syndicated speculative-grade senior secured loans and bonds issued mainly by European borrowers. AXA Investment Managers, Inc. is the collateral manager.

Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following such an event, the notes will switch to semiannual payments. The transaction has a six-month ramp-up period, a four-year reinvestment period, and a maximum weighted-average life of eight years from the closing date.

At the end of the ramp-up period, we understand that the portfolio will represent a well-diversified pool of corporate credits. Therefore, we have conducted our credit and cash flow analysis by applying our criteria for corporate cash flow collateralized debt obligations (CDOs; see "Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Sept. 17, 2015).

Our preliminary ratings reflect our assessment of the preliminary collateral portfolio's credit quality and the available credit enhancement for the rated notes through the subordination of payable cash flows. In our cash flow analysis, we used the €350 million target par amount, the covenanted weighted-average spread (4.20%), the covenanted weighted-average coupon (5.25%), and the covenanted weighted-average recovery rates at each rating level. 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.

The Bank of New York Mellon, London Branch is the bank account provider and custodian. The portfolio can comprise a maximum of 30% non-euro-denominated obligations, subject to an asset swap provided by a hedge counterparty. The participants' downgrade remedies are expected to be in line with our current counterparty criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on June 25, 2013).

The issuer is expected to be bankruptcy remote, in accordance with our European legal criteria (see "Europe Asset Isolation And Special-Purpose Entity Criteria--Structured Finance," published on Sept. 13, 2013).

Following our analysis of the credit, cash flow, counterparty, operational, and legal risks, we believe our preliminary ratings are commensurate with the available credit enhancement for each class of notes.