OREANDA-NEWS. Fitch Ratings has assigned the following ratings and Rating Outlooks to Ares XXXIX CLO Ltd./LLC:

--$5,000,000 class X Notes 'AAAsf', Outlook Stable;

--$325,000,000 class A Notes 'AAAsf', Outlook Stable;

--$55,000,000 class B Notes 'AAsf', Outlook Stable.

Fitch does not rate the class C, D or E notes or the subordinated notes.

TRANSACTION SUMMARY

Ares XXXIX CLO Ltd. and Ares XXXIX CLO LLC (together, Ares XXXIX) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Ares CLO Management II LLC (a subsidiary of Ares Management LLC). Net proceeds from the issuance of notes will be used to purchase a portfolio of approximately $500 million of leveraged loans. The CLO will have an approximately 4.75-year reinvestment period and 2.75-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 35% for class A notes and 24% for the class B notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' and 'AAsf' stress scenarios, respectively. The level of CE for class A notes is below the average for recent 'AAAsf' rated CLO notes; however, cashflow modeling results indicate performance in line with other Fitch-rated 'AAAsf' CLO notes. The level of CE for class B notes is in line with the average for recent 'AAsf' rated CLO notes. Class X notes are ultimately expected to be paid in full, primarily from the application of interest proceeds.

'B+'/'B' Asset Quality: The average credit quality of the indicative portfolio is 'B+'/'B', which is comparable with recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch's opinion, class X, A and B notes are unlikely to be affected by the foreseeable level of defaults. Class X, A and B notes are robust against default rates of up to 100.0%, 60.4% and 57.3%, respectively.

Strong Recovery Expectations: The indicative portfolio consists of 97.7% senior secured loans. Approximately 90% of the indicative portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher, and the base case recovery assumption is 80.4%. In determining ratings for class X, A and B notes, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions of higher rating stresses, resulting in recovery rates of 40.5% and 48.9% in Fitch's 'AAAsf' and 'AAsf' scenarios, respectively.

RATING SENSITIVITIES

Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. Fitch expects the class X and A notes to remain investment grade, even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios were 'AAAsf' for class X notes, ranged between 'Asf' and 'AAAsf' for the class A notes, and ranged between 'BBB-sf' and 'AAAsf' for the class B notes.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

The publication of a representations, warranties and enforcement mechanisms appendix is not required for this transaction.