OREANDA-NEWS. Fitch Ratings has assigned the following rating and Rating Outlook to SCOF-2 Ltd./LLC:

-- $317,500,000 class A notes 'AAAsf'; Outlook Stable.

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

TRANSACTION SUMMARY

SCOF-2 Ltd. (the issuer) and SCOF-2 LLC (the co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Symphony Asset Management LLC. Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $500 million of primarily senior secured leveraged loans. The CLO will have an approximately 4.25-year reinvestment period and 2.25-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 a 'AAAsf' stress scenario. The degree of CE available to class A notes is in line with the average CE of recent CLO issuances.

'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 Ratings' opinion, class A notes are unlikely to be affected by the foreseeable level of defaults. Class A notes are projected to be able to withstand default rates of up to 63.2%.

Strong Recovery Expectations: The indicative portfolio consists of 93.2% first lien senior secured loans. Approximately 90% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, resulting in a base case recovery assumption of 75.9%. In determining the class A note ratings, 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 stress assumptions. The analysis of class A notes assumed a 37% recovery rate in Fitch's 'AAAsf' scenario.

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. Results under these sensitivity scenarios ranged between 'A+sf' and 'AAAsf' for the class A notes.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, available by clicking the link below.

DUE DILIGENCE USAGE

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