Fitch Rates Dryden 43 Senior Loan Fund /LLC
--$381,000,000 class A notes 'AAAsf'; Outlook Stable;
--$4,800,000 class X notes 'AAAsf'; Outlook Stable.
Fitch does not rate the class B, C, D, E or subordinated notes.
TRANSACTION SUMMARY
Dryden 43 Senior Loan Fund (the issuer) and Dryden 43 Senior Loan Fund LLC (the co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by PGIM, Inc. Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $600 million of primarily senior secured leveraged loans. The CLO will have an approximately five-year reinvestment period and a two-year noncall period.
KEY RATING DRIVERS
Sufficient Credit Enhancement: Credit enhancement (CE) of 36.5% for class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The degree of CE available to the class A notes is in line with the average CE of recent CLO issuances and cash flow modeling results indicate performance in line with other Fitch-rated 'AAAsf' CLO notes. Class X notes are expected to be paid in full from the application of interest proceeds in accordance with a payment schedule over the first 23 payment dates.
'B+/B' Asset Quality: The average credit quality of the indicative portfolio is 'B+/B', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative
Credit quality; however, in Fitch's opinion, class A and X notes are unlikely to be affected by the foreseeable level of defaults. Class A and X notes are robust against default rates of up to
59.8% and 95.7%, respectively.
Strong Recovery Expectations: The indicative portfolio consists of 96.1% first lien senior secured loans. Approximately 89.3% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher, and the base case recovery assumption is 79.2%. In determining the class A and X note ratings, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stresses, resulting in a 38.6% recovery rate assumption in Fitch's 'AAAsf' scenario.
RATING AGENCY CONFIRMATIONS
The transaction's concentration limitation for fixed-rate assets is initially 4%; however, the transaction documents permit this limitation to be increased to 10% subject to receipt of rating confirmation from Fitch. In addition, issuer account banks may be established at an institution that does not meet minimum rating requirements otherwise required pursuant to the transaction documents subject to receipt of rating confirmation from Fitch. Investors should be aware that the provision of rating confirmations is at the discretion of Fitch, which may choose not to provide rating confirmations. Further information regarding Fitch's position with respect to rating confirmations can be found in the special report titled "Unintended Consequences of Rating Confirmation References," dated Oct. 9, 2013, available on Fitch's website at www. fitchratings. com.
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 A notes to remain investment grade even under the most extreme sensitivity scenarios, with results under these sensitivity scenarios ranging between 'A-sf' and 'AAAsf'. The class X notes are expected to remain 'AAAsf' under even the most extreme sensitivity scenarios.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool was not prepared for this transaction. Offering documents for U. S. CLO transactions do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. Therefore, Fitch credit reports for U. S. CLO transactions will not typically include descriptions of RW&Es. For further information, please see Fitch's Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.
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