OREANDA-NEWS. Fitch Ratings has affirmed Jubilee CDO VIII B.V. and revised the Outlook on the class A2 to E notes to Stable as follows:

EUR122.1m Class A-1 (ISIN XS0331559640): affirmed at 'AAAsf'; Outlook Stable
EUR24m Class A-2 (ISIN XS0331560572): affirmed at 'AAAsf'; Outlook revised to Stable from Negative
EUR42m Class B (ISIN XS0331560655): affirmed at 'Asf'; Outlook revised to Stable from Negative
EUR20m Class C (ISIN XS0331560903): affirmed at 'BBBsf'; Outlook revised to Stable from Negative
EUR18m Class D (ISIN XS0331561208): affirmed at 'BBsf'; Outlook revised to Stable from Negative
EUR16m Class E (ISIN XS0331561463): affirmed at 'B-sf'; Outlook revised to Stable from Negative

Jubilee CDO VIII B.V. is a securitisation of mainly European senior secured loans, senior unsecured loans, second-lien loans, mezzanine obligations and high-yield bonds. At closing a total note issuance of EUR400m was used to invest in a target portfolio of EUR388m. The portfolio is actively managed by Alcentra Ltd.

KEY RATING DRIVERS
The affirmations reflect the adequate credit enhancement available to the notes.

The reported share of assets rated 'CCC' or below has increased to 18.3% of the aggregate collateral balance from 12.0% in October 2014. However, the overall credit quality of the portfolio has remained stable, with the reported weighted average rating factor increasing only slightly to 30.03 from 29.24 in October 2014. The portfolio rating distribution is thus more bar-belled.

Obligor concentration in the portfolio continues to increase, with the largest obligor accounting for 4.9% of the portfolio, up from 3.8% in October 2014.

The revision of the Outlook on the class A-2, B, C, D, and E notes reflects the increase in credit enhancement since the last review. The class A-1 notes received EUR85.3m of principal proceeds in the past 12 months. A further EUR2.2m of interest proceeds was used to redeem the class A-1 notes, bringing the total redemption amount over the past 12 months to EUR87.6m. This compares with a class A-1 redemption amount of EUR24.5m over the preceding 12 months. The sizable deleveraging of the structure was driven almost exclusively by prepayments.

All overcollateralisation (OC) tests have been in compliance since the last review. Deleveraging more than offset the rise in the share of assets rated 'CCC' or below, leading to a sizable increase in all OC test results. Assets rated 'CCC' or below exceeding 5% of the aggregate collateral balance are considered at the lower of their market value or expected recovery rate for the purposes of the OC tests. All interest coverage (IC) tests have been passed with significant buffer. The IC tests for the transaction have not been breached so far.

The transaction exited its reinvestment period in January 2014. Reinvestment of unscheduled principal proceeds and sale proceeds from credit-improved or credit-impaired assets is currently not permitted due to several conditions not being met (including passing the Fitch weighted average rating factor test).

The transaction uses a macro currency swap to hedge sterling exposure. The hedge is not perfect and residual currency risk is borne by the structure. When a sterling asset defaults, the sterling recovery proceeds might be insufficient to reduce the swap balance to the performing sterling collateral balance and the manager will have to obtain sterling in the spot market. Also, while awaiting recovery proceeds, the structure continues to make payments on the sterling leg of the macro currency swap, even though the defaulted asset no longer generates sterling interest. This currency mismatch is partially mitigated through the use of currency options. The remaining exchange rate exposure is absorbed by the structure.

The macro currency swap is scheduled to expire in January 2019. As of end-September 2015 the portfolio contained sterling assets totalling GBP17.5m (down from GBP21.1m a year ago), which mature after the expiration of the macro currency swap. This increases the sensitivity of the transaction to currency risk at the tail end of its life.

RATING SENSITIVITIES
A 25% increase in the obligor default probability would lead to a downgrade of between zero and two notches for the rated notes.

A 25% reduction in expected recovery rates would lead to a downgrade of between zero and two notches for the rated notes.

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

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognized Statistical Rating Organizations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Transaction reporting provided by the trustee (BNY Corporate Trustee Services Limited) as at 7 September 2015
- Macro swap balance provided by the trustee (BNY Corporate Trustee Services Limited) as at 7 September 2015