Fitch Assigns Expected Ratings to One Class of ICG US CLO 2014-3, Ltd./LLC

Fitch Ratings has assigned the following expected rating to ICG US CLO 2014-3, Ltd./LLC:

--$258,700,000 class A-1 senior secured floating rate notes 'AAAsf'; Outlook Stable.

Fitch does not expect to rate the class A-2, B, C, D, E or subordinated notes.

The assignment of the expected ratings is contingent on the receipt of final documents conforming to information already reviewed.

TRANSACTION SUMMARY

ICG US CLO 2014-3, Ltd. (issuer) and ICG US CLO 2014-3, LLC (co-issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by ICG Debt Advisors LLC (ICG Debt Advisors). Fitch's Funds and Asset Manager Ratings team has evaluated ICG Debt Advisors and determined its capabilities to be acceptable for purposes of managing this transaction. Net proceeds from the issuance of the notes will be used to purchase a portfolio of approximately $400 million of leveraged loans. The CLO will have a 4.0-year reinvestment period and a 2.0-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 35.3% for class A-1 notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the 'AAAsf' stress scenario. The level of CE for class A-1 notes is below the average for 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 relatively weak credit quality; however, in Fitch Ratings' opinion, class A-1 notes are unlikely to be affected by the foreseeable level of defaults. Class A-1 notes are robust against default rates of up to 59.7%.

Strong Recovery Expectations: The indicative portfolio consists of 98.0% senior-secured loans. Approximately 91.2% 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 77.6%. In determining ratings for the A-1 notes, 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 35.7% recovery rate assumption in Fitch's 'AAAsf' scenario.

FITCH ANALYSIS

Analysis was conducted on a Fitch-stressed portfolio that was created by Fitch and designed to address the impact of the most prominent risk-presenting concentration allowances and targeted test levels to ensure that the transaction's expected performance is in-line with the rating assigned. The Fitch-stressed portfolio was assumed to be $400 million, 90% of which represented senior secured loans and 10% second lien loans. Notable portfolio concentrations specified by the transaction documents include:

--Minimum 90% senior secured loans and principal cash;

--Maximum 10% second lien loans and unsecured loans;

--Maximum 2.5% concentration for the top 5 obligors; no others greater than 2.0%;

--Maximum 7.5% assets rated 'Caa1' and below (by Moody's);

--Maximum 5.0% fixed-rate assets;

--Maximum 60.0% cov-lite loans;

--Maximum industry concentrations: 15.0% for one industry, 12.0% for the next two largest industries, and no others > 10.0%.

Maximum obligor concentrations were assumed for the top five senior secured loans. Fitch also maximized the permitted industry concentrations for the three largest industries and assumed the maximum permitted portfolio weighted average life of eight years when creating the Fitch-stressed portfolio.

The allowable exposure to 'CCC' rated collateral is 7.5% as defined by Moody's. Fitch considers 0.8% of the indicative portfolio, which is a portfolio provided by the arranger representing the intended ramped portfolio, to be rated in the 'CCC' category, and therefore did adjust this percentage in the Fitch-stressed analysis to 7.5%. Fitch assumed 95% of the portfolio to be floating rate and to pay a spread of 3.70% over LIBOR, representing the initial minimum weighted average spread, and 5.0% to be fixed rate with 7.0% coupons, representing the minimum weighted average coupon, both as represented to Fitch by the arranger Citigroup Global Markets Inc.

Projected default and recovery statistics of the Fitch-stressed portfolio were generated using Fitch's portfolio credit model (PCM). The PCM default rate and recovery rate outputs were 61.7% and 35.7%, respectively, at the 'AAAsf' rating level. The PCM outputs were used as inputs into Fitch's proprietary cash flow model, which was customized to reflect ICG's specific transaction structure.

Fitch analyzed 12 stress scenarios in the analysis of the indicative and Fitch stress portfolios. The class A-1 notes passed the 'AAAsf' PCM hurdle rate in all 12 stress scenarios when analyzing the indicative portfolio but fell marginally short in two scenarios when evaluating the Fitch stressed portfolios. Despite the two model failures, Fitch was comfortable assigning an expected 'AAAsf' rating to the class A-1 notes, because the agency believes the notes can sustain a robust level of defaults, combined with low recoveries, and due to other factors such as strong performance of the notes in the sensitivity scenarios, the degree of cushion when analyzing the indicative portfolio and ICG Debt Advisor's strong track record as a CLO asset manager.

Fitch also analyzed the indicative portfolio, which included 102 loans from 101 obligors accounting for 73.1% of the target portfolio amount and 38 unidentified assets with assumed characteristics constituting the remaining 26.9% of the indicative portfolio. The 'AAAsf' PCM default rate of the indicative portfolio was 51.9% and cash flow analysis of the indicative portfolio indicated performance that compared favorably to the Fitch-stressed portfolio analysis, as the minimum breakeven cushion was 8.3% above the PCM default hurdle.

SENSITIVITY ANALYTICS

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-1 notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'BBB+sf' and 'AAAsf' for the class A-1 notes.

The expected ratings are based on information provided to Fitch as of Nov. 25, 2014. Sources of information used to assess these ratings were provided by the arranger, Citigroup Global Markets Inc., and the public domain. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying pre-sale report, which will shortly be available at www.fitchratings.com.

PERFORMANCE ANALYTICS

Fitch will monitor the transaction regularly and as warranted by events with a review. Events that may trigger a review include, but are not limited to, the following:

--Asset defaults;

--Portfolio migration;

--OC or IC test breach;

--Breach of concentration limitations or portfolio quality covenants;

--Future changes to Fitch's rating criteria.

Surveillance analysis is conducted on the basis of the then-current portfolio. Fitch's goal is to ensure that the assigned ratings remain an appropriate reflection of the issued notes' credit risk.

Details of the transaction's performance are available to subscribers on Fitch's Web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Global Rating Criteria for Corporate CDOs' (July 25, 2014);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds' (Jan. 23, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014).

Applicable Criteria and Related Research: ICG US CLO 2014-3, Ltd./LLC

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=822288

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725537

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=936295

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