Moody's upgrades EUR 60m CLO Notes of Laurelin B.V

Global rating agency Moody's has taken the following rating actions on the notes issued by Laurelin B.V.

Laurelin B.V., issued in July 2006, is a multicurrency Collateralised Loan Obligation ("CLO") backed by a portfolio of mostly high yield European loans. The portfolio is managed by GoldenTree Asset Management L.P and the transaction has passed the reinvestment period in October 2011. It is predominantly composed of senior secured loans.

According to Moody's, the rating actions taken on the notes result primarily from increase in overcollateralization ("OC") ratios across the liability capital structure, due to amortisation. The OC ratios of the rated notes have improved since last rating action in August 2011. As of the latest trustee report dated February 2013, the Class A/B, Class C and Class D OC ratios are reported at 261.4%, 187.5% and 157.8%, respectively, versus July 2011 report- ed levels of 168.99%, 144.59% and 131.89% respectively.

In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of EUR 250 million, a weighted average default probability of 24.44% (consistent with a WARF of 3,854), a weighted average recovery rate upon default of 48.09% for a Aaa liability target rating, a diversity score of 18 and a weighted average spread of 3.68%. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool.

The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. For a Aaa liability target rating, Moody's assumed that 95.2% of the portfolio exposed to senior secured corporate assets would recover 50% upon default, while the remainder non first-lien loan corporate assets would recover 10%. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also relevant factors. These default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed.

In addition to the base case analysis described above, Moody's also performed sensitivity analyses on key parameters for the rated notes: Deterioration of credit quality to address the refinancing and sovereign risks -Approximately 20.7% of the portfolio is rated B3 and below with maturities between 2014 and 2016, which may create challenges for issuers to refinance. The portfolio is also exposed to 8.1% of obligors located in Ireland and Spain. Moody's considered the scenario where the WARF of the portfolio was increased to 4,128 by forcing to Ca the credit quality of 25% of such exposures subject to refinancing or sovereign risks.