DBRS Morningstar Discontinues and Withdraws Ratings on Nine Colonnade Transactions

DBRS Ratings Limited (DBRS Morningstar) discontinued its provisional ratings on nine Colonnade transactions at the request of Barclays Bank PLC (Barclays or the Beneficiary). Please see the complete list of affected ratings at the bottom of this press release.

Each transaction is a synthetic balance-sheet collateralised loan obligation structured in the form of a financial guarantee (the Guarantee). The tranches are collateralised by a portfolio of corporate loans and credit facilities (the Guaranteed Portfolio) originated by Barclays. The rated tranches are unfunded, and the senior guarantee remains unexecuted.

DBRS Morningstar conducted a review of the potential risk exposure of CLOs to the Coronavirus Disease (COVID-19) by examining sensitivity to potential company credit-quality rating downgrades in conjunction with its ongoing assessment of macroeconomic scenarios, as described in its commentary “CLO Risk Exposure to the Coronavirus Disease (COVID-19)” https://www.dbrsmorningstar.com/research/361112/clo-risk-exposure-to-the-coronavirus-disease-covid-19, published on 18 May 2020.

Across the nine Colonnade transactions, DBRS Morningstar’s review found that, as of the June 2020 monthly report, on average, 1.7% and 29.8% of the outstanding portfolio balance belonged to mid-high and high risk industries, respectively, as per the commentary mentioned above. As of the June 2020 monthly report, the minimum exposure to mid-high and high risk industries across the nine transactions, was 0.6% and 20.2% of the outstanding portfolio balance, respectively. As of the June 2020 monthly report, the maximum exposure to mid-high and high risk industries across the nine transactions, was 4.3% and 45.4% of the outstanding portfolio balance, respectively.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were updated on 1 June 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/361867/global-macroeconomic-scenarios-june-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar’s analysis considered impacts consistent with the moderate scenario in the referenced reports.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in British pound sterling or US Dollars unless otherwise noted.

The principal methodology applicable to the ratings is “Rating Methodology for CLOs and CDOs of Large Corporate Credit” (28 February 2020).

In DBRS Morningstar’s opinion, a discontinued-withdrawn rating action does not warrant the application of the entire principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in these transactions are listed at the end of this press release.

These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include reference registries, portfolio reports, and a withdrawal request provided by Barclays.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

For all transactions, at the time of the initial ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on Colonnade Global 2017-1 and Colonnade Global 2017-3 took place on 5 September 2019, where DBRS Morningstar confirmed the provisional ratings of these transactions. The last rating action on Colonnade UK 2016-1, Colonnade UK 2016-2, and Colonnade Global 2016-1 took place on 16 October 2019, where DBRS Morningstar confirmed and upgraded the provisional ratings of these three transactions. The last rating action on Colonnade Global 2018-2, Colonnade Global 2018-3X, and Colonnade Programme – Series Global 2018-4 took place on 25 October 2019, where DBRS Morningstar confirmed its provisional ratings of these transactions. The last rating action on Colonnade UK 2017-1 took place on 5 November 2019, where DBRS Morningstar confirmed the provisional ratings of this transaction.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

As this is a discontinued-withdrawn rating action, a sensitivity analysis is not applicable.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and U.S. regulations only.

Lead Analyst: Natalia Coman, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date for Colonnade UK 2016-1, Colonnade UK 2016-2, Colonnade Global 2016-1: 29 December 2016
Initial Rating Date for Colonnade UK 2017-1: 14 December 2017
Initial Rating Date for Colonnade Global 2017-1: 29 September 2017
Initial Rating Date for Colonnade Global 2017-3: 5 September 2017
Initial Rating Date for Colonnade Global 2018-2: 29 November 2018
Initial Rating Date for Colonnade Global 2018-3X: 6 December 2018
Initial Rating Date for Colonnade Programme – Series Global 2018-4: 21 December 2018

DBRS Ratings Limited
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The rating methodologies used in the analysis of these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Rating CLOs and CDOs of Large Corporate Credit (28 February 2020) and CLO Asset Model v2.2.3
https://www.dbrsmorningstar.com/research/357452/rating-clos-and-cdos-of-large-corporate-credit.
-- Master European Structured Finance Surveillance Methodology (22 April 2020) https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology.
-- Mapping Financial Institution Internal Ratings to DBRS Ratings for Global Structured Credit Transactions (11 March 2020)
https://www.dbrsmorningstar.com/research/357853/mapping-financial-institution-internal-ratings-to-dbrs-morningstar-ratings-for-global-structured-credit-transactions.
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019) https://www.dbrsmorningstar.com/research/351557/interest-rate-stresses-for-european-structured-finance-transactions.
-- Legal Criteria for European Structured Finance Transactions (11 September 2019) https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020) https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers.
-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020) https://www.dbrsmorningstar.com/research/357430/operational-risk-assessment-for-european-structured-finance-originators.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.