According to Fitch Ratings, the Amendment No. 1 to the Indenture and the First and Second Amendments to the Pledge and Intercreditor Agreement proposed by Sankaty Advisors, LLC (Sankaty), the collateral manager for Sankaty High Yield Partners III, L.P. (Sankaty III), would not adversely affect Fitch's ratings of the collateralized debt obligation (CDO) liabilities.
The First Amendment to the Pledge and Intercreditor Agreement was put into place on April 14, 2009 and allows for the Controlling Class to approve sales, dispositions, purchases, and payouts by the Custodian. In addition, the First Amendment places a cap of $500,000 on legal fees per year for the transaction and Advisory Fees were removed from the transaction. Fitch was notified of the amendment and the information did not result in a rating review of the transaction.
The proposed Amendment No. 1 to the Indenture and the proposed Second Amendment to the Pledge and Intercreditor Agreement would allow the issuer and affiliates of the issuer to vote according to their ownership of notes whereas they are currently unable to do so. The amendments would allow the issuer and issuer's affiliates to vote approximately 12% of the class B notes and 16% of the class E notes. Based on current holdings, neither class of notes is currently the Controlling Class, and the change will not result in a majority of votes for either class.
Fitch's current rating criteria does not specifically address the proposed changes to the Pledge and Intercreditor Agreement or Indenture. The impact of the proposed changes, although currently unquantifiable, could benefit one noteholder over another and each has advantages and disadvantages. For example, an earlier sale of portfolio assets will pay down the senior notes faster, but at the expense of potential future improvement in asset values. The applicable rating criteria for Sankaty III, 'Rating Market Value Structures', dated April 18, 2008, is available on Fitch's web site at www.fitchratings.com.
Fitch is not a party to the transaction and therefore does not provide consent or approval of the Pledge and Intercreditor Agreement or the Indenture, as that remains the sole preserve of the transaction parties. Fitch has received notification that a majority of the Controlling Class has consented to the amendments. Fitch has received and reviewed the latest amendment documents and expects to be notified by the trustee when or if the proposed amendments are executed.
Additional information is available at www.fitchratings.com.
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Contacts:
Fitch Ratings, New York
Jenny Story, 212-908-0302
Taka
Ushiroda, 212-908-0881
or
Sandro Scenga, 212-908-0278 (Media
Relations)
sandro.scenga@fitchratings.com
