Structured Finance

Structured Credit / U.S.A.

Cole Park CLO Limited/LLC

New Issue Report

Inside This Report Capital Structure

Page
Transaction Summary 1
Key Rating Drivers 1 Rating Amount Interest Final
a
Transaction Comparison 2 Class Rating Outlook ($ Mil.) CE (%) Rate (%) Maturity TT (%) TTLM (x)
b
Asset Analysis 2 A-1 Loans AAAsf Stable 53.00 36.5 3mL + 1.50 October 2028 63.5 7.7
Cash Flow Analysis 4 b
A-1 Notes AAAsf Stable 202.00 36.5 3mL + 1.50 October 2028 63.5 7.7
Portfolio Management 7 A-2 AAAsf Stable 15.00 36.5 3.13 October 2028 63.5 7.7
Additional Structural Features 9
Counterparty Risk 12 B NR N.A. 50.50 24.6 3mL + 2.25 October 2028 N.A. N.A.
Transaction and Legal Structure 13 C NR N.A. 21.25 19.6 3mL + 3.00 October 2028 N.A. N.A.
Criteria Application, Model and D NR N.A. 26.75 13.3 3mL + 3.90 October 2028 N.A. N.A.
Data Adequacy 14
E NR N.A. 23.50 7.8 3mL + 6.10 October 2028 N.A. N.A.
Performance Analytics 15
Appendices 16−21 Subordinated Notes NR N.A. 43.82 N.A. Residual October 2028 N.A. N.A.
Total 435.82
Ratings are not a recommendation to buy, sell or hold any security. The offering circular and other materials should be reviewed
a b
prior to any purchase. Credit enhancement (CE) is based on the target par amount of $425.0 million. Class A-1 loans include a
conversion option to convert all or a portion of class A-1 loans into an equivalent amount of class A-1 notes. The balance of class
A-1 notes may be increased up to $255 million upon conversion. TT – Tranche thickness. TTLM – Tranche thickness loss multiple.
NR − Not rated. N.A. − Not applicable. 3mL – Three-month LIBOR.
Related Criteria
Global Structured Finance Rating
Criteria (July 2015) Transaction Summary
Global Rating Criteria for CLOs and Cole Park CLO Limited (issuer) and Cole Park CLO LLC (co-issuer) together comprise an
Corporate CDOs (November 2015)
Criteria for Interest Rate Stresses in arbitrage cash flow collateralized loan obligation (CLO) that will be managed by
Structured Finance Transactions and GSO/Blackstone Debt Funds Management LLC (DFM). Net proceeds from the issuance of the
Covered Bonds (December 2014)
Counterparty Criteria for Structured
secured and subordinated notes will be used to purchase a portfolio of approximately
Finance and Covered Bonds $425 million of primarily senior secured leveraged loans. The CLO will have an approximately
(May 2014)
five-year reinvestment period and two-year noncall period.

Key Rating Drivers

Sufficient Credit Enhancement: Credit enhancement (CE) of 36.5% for the class A-1 loans, class
A-1 notes and class A-2 notes (together, class A debt), in addition to excess spread, is sufficient to
protect against portfolio default and recovery rate projections in the ‘AAAsf’ stress scenario. The
degree of CE available to the class A debt is in line with the average CE of recent CLO issuances
and cash flow modeling results indicate performance in line with other Fitch-rated ‘AAAsf’ CLO
notes.
‘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 debt is unlikely to be affected by the
Analysts
Structured Credit
foreseeable level of defaults. Class A debt is projected to be able to withstand default rates of up to
Amy Drobish 63.2%.
+1 212 908-9194
amy.drobish@fitchratings.com Strong Recovery Expectations: The indicative portfolio consists of 97.0% senior secured loans.
Erika Tsang, CFA Approximately 92.6% of the indicative portfolio has strong recovery prospects or a Fitch-assigned
+1 212 908-0817
erika.tsang@fitchratings.com recovery rating of ‘RR2’ or higher and the base case recovery assumption is 77.4%. In determining
Fund and Asset Manager Ratings ratings for class A debt, Fitch stressed the indicative portfolio by assuming a higher portfolio
Russ Thomas concentration of assets with lower recovery prospects and further reduced recovery assumptions for
+1 312 368-3189
russ.thomas@fitchratings.com higher rating stresses resulting in a 37.7% recovery rate assumption in Fitch’s ‘AAAsf’ scenario.

www.fitchratings.com March 31, 2016

 Structured Finance
Transaction Comparison
a
4Q15 CLOs
Cole Park CLO Treman Park CLO Avg. Minimum Maximum
GSO/Blackstone GSO/Blackstone
  
Collateral Manager Debt Funds Mgmt Debt Funds Mgmt
Target Portfolio Amount ($ Mil.) 425.0 600.0 480.4 200.0 992.0
Closing Date 12/7/15 4/9/15   
Reinvestment (Years) 4.9 4.0 4.2 0.0 5.1
Noncall (Years) 1.9 1.5 2.1 1.0 3.1
Maturity Date 10/20/28 4/20/27   
'AAA' Spread (bps) 150 150 153 130 180
Notes  Credit Enhancement
'AAA' CE (%) 36.5 35.0 36.7 32.5 45.4
Structure
Senior OC Test (Class) A/B A   
Initial Senior OC Test Cushion (%) 10.0 11.2 9.9 5.5 10.7
Portfolio Covenants and Concentration
Max. WAL (Years) 9.0 8.0 8.2 6.5 9.0
Initial Target Moody's WARF 2693 2720 2718 2316 3100
Max. CCC Assets (%) 7.5 7.5 7.5 7.5 7.5
Min. WAS (%) 3.70 3.65 3.77 3.30 4.20
Initial WAS All-In Rate (%)b 4.53 4.61 4.41 4.03 4.75
Max. Fixed Assets (%) 5.0 5.0 5.0 0.0 10.0
Min. WAC (%) 7.50 7.50 7.14 5.00 7.50
Max. Single Obligor (Top Five) (%) 2.5 2.5 2.5 2.0 3.0
Max. Single Obligor (Below Top Five) (%) 2.0 2.0 2.0 1.5 2.5
Max. Single Industry (Largest) (%) 15.0 15.0 15.0 13.5 17.0
Max. Single Industry (Second Largest) (%) 12.0 12.0 12.3 12.0 15.0
Max. Single Industry (Third Largest) (%) 10.0 10.0 11.2 10.0 13.5
Max. Single Industry (Fourth Largest) (%) 10.0 10.0 10.5 10.0 12.0
Max. Single Industry (Below Top Four) (%) 10.0 10.0 10.1 10.0 12.0
Min. Senior Secured (%) 90.0 90.0 91.6 85.0 96.0
Max. Second-Lien (%) 10.0 10.0 8.4 4.0 15.0
Max. Subordinate (%) 0.0 0.0 0.0 0.0 0.0
Max. Senior Unsecured (%) 10.0 10.0 7.9 0.0 15.0
Max. Covenant-Lite (%) 55.0 55.0 64.6 50.0 80.0
Max. Long-Dated Collateral (%) 0.0 0.0 0.1 0.0 2.0
Max. Other Than U.S. (%) 20.0 20.0 20.0 20.0 20.0
a
Includes arbitrage CLOs backed by portfolios of broadly syndicated loans that priced in the fourth quarter of 2015.
b
Cole Park CLO's WAS without benefit of LIBOR floors is 3.90%.

Fitch’s analysis centered on a Fitch Asset Analysis

stressed portfolio, which was created by
making adjustments to the indicative
portfolio to reflect permissible
concentration limits and collateral quality
test levels, as described in this report.
References to the Fitch stressed portfolio
in this report reflect the portfolio created
by Fitch.
The Fitch Portfolio Credit Model (PCM) was used to determine hurdle default rates (rating default
rates, or RDRs) and expected portfolio recovery rates (rating recovery rates, or RRRs) for the
‘AAAsf’ rating level. The PCM was run on the indicative portfolio as well as a Fitch stressed portfolio
created according to the portfolio concentration limits and collateral quality tests, as described below.
Fitch’s analysis focused on the Fitch stressed portfolio, given the manager’s ability to reinvest
principal proceeds.

Related Research The indicative portfolio presented to Fitch included 180 identified assets from 152 primarily high-
Global CLO Market Trends Quarterly yield (HY) obligors totaling approximately $406.9 million, or 95.8% of the target initial par amount.
(January 2016)
U.S. Leveraged Market Quarterly
Additionally, there are 5 unidentified obligors with assumed characteristics comprising the remaining
(January 2016) 4.2% of the portfolio. Fitch considers the indicative portfolio to be of similar diversity in terms of rating
U.S. Leveraged Loan CLO Tracker and recovery distributions and obligor and industry concentrations relative to recently issued CLOs.
(February 2016)
U.S. CLO Index (February 2016)

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Fitch has an explicit rating or a credit
opinion on approximately 36% of the
identified portion of the indicative
portfolio.
Structured Finance
Asset Quality
The weighted average rating of the indicative portfolio is ‘B+/B’. Fitch has an explicit rating or a
credit opinion for 49 obligors comprising 34.5% of the indicative portfolio par balance; ratings
for 61.3% of the indicative portfolio were derived using Fitch’s issuer default rating (IDR)
equivalency map. In addition, 4.2% consisted of unidentified obligors that were indicated to be
within the ‘B’ rating category. There were no assets in the portfolio without a public rating or a
Fitch credit opinion.
The transaction has concentration limitations to address permitted exposure to ‘CCC’ rated
collateral, as defined by either Moody’s or S&P, with a maximum allowance of 7.5%. The
exposure to ‘CCC’ assets was increased in the Fitch stressed portfolio to reach the 7.5%
permitted exposure.

Asset Security
The indicative portfolio consists of 97.0% first-lien senior secured loans and 3.0% second-lien loans.
Fitch has assigned asset-specific recovery ratings to assets comprising 28.9% of the indicative
portfolio. For assets to which no asset-specific recovery ratings have been assigned, Fitch applied
the standard Fitch recovery rate assumptions for assets based in the same jurisdiction and having
the same ranking in the capital structure (as determined in the agency’s “Global Rating Criteria for
CLOs and Corporate CDOs,” available on Fitch’s website at www.fitchratings.com).

Recovery Distribution
(As of Dec. 7, 2015)
(%) Indicative Portfolio Fitch Stressed Portfolio
80
70
60
50
40
30
20
10
0
RR1 RR2 (Superior: Strong Recovery RR3 (Good: 51%– RR6 (Poor: 0%– Weak Recovery
(Outstanding: 71%–90%) 70%) 10%)
91%–100%)

The transaction’s concentration limitations specify that a minimum of 90% of the portfolio must
consist of first-lien senior secured loans, eligible investments and cash. Up to 10% of the portfolio
may consist of second-lien loans and senior unsecured loans. In its construction of the Fitch
stressed portfolio, Fitch assumed that 10% of the portfolio consists of assets with junior priority

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 Structured Finance
claims or no claims on the underlying security. Assets with these properties would be expected to
demonstrate weak recovery prospects.

Industry and Obligor Concentration

The transaction allows the largest
Moody’s industry to represent up to 15% Top Five Industry Concentrations
of the portfolio, the second largest Indicative Fitch Stressed
Moody’s industry to represent up to 12% Industry Portfolio (%) Portfolio (%)
Business Services 14.5 15.0
of the portfolio, and caps all other Healthcare 14.2 14.2
industries at 10%. Fitch accounted for Telecommunications 12.3 12.3
the maximum allowable industry Retail 8.5 9.3
Computers and Electronics 9.1 8.4
concentrations in its creation of the Fitch
stressed portfolio; the second and third
largest Fitch industries already exceeded their permissible levels, thus the percentages were
maintained, as shown in the accompanying table. Separately, the top five obligors in the portfolio
are each allowed to make up 2.5% of the portfolio. Remaining obligors may each constitute up to a
maximum of 2.0% of the portfolio. In constructing the Fitch stressed portfolio, Fitch mocked up
the top five obligors to their maximum permissible levels as shown in the table below.

Top Five Obligor Concentrations

Indicative Fitch Stressed
Obligor Fitch Rating Portfolio (%) Portfolio (%) Fitch Industry Seniority
1 B 1.2 2.5 Retail Senior Secured Loan
2 B 1.2 2.5 Healthcare Senior Secured Loan
3 B 1.1 2.5 Business Services Senior Secured Loan
4 B 0.9 2.5 Transportation and Distribution Senior Secured Loan
5 B 0.9 2.5 Banking and Finance Senior Secured Loan

Weighted Average Life

The identified portfolio has a weighted average life (WAL) of approximately 5.9 years while the
transaction is initially covenanted to a nine-year maximum WAL that steps down with the passage of
time. Fitch assumed a nine-year WAL in the Fitch stressed portfolio.

Additional Portfolio Concentrations

In addition to the permitted ‘CCC’ bucket, seniority restrictions, and industry and obligor
concentrations, the documents include other notable concentration limitations. Exposure to
fixed-rate assets, current pay obligations, assets paying less frequently than quarterly, partial
PIK securities and debtor-in-possession loans, among others, are kept to a minimum. The
issuer is not permitted to invest in letters of credit, bridge loans, or long-dated assets among
others.

These concentration limitations and collateral quality tests are further detailed in Appendix D,
starting on page 20.

Cash Flow Analysis

Fitch used a customized proprietary cash flow model to replicate the principal and interest waterfalls
(described in detail in Appendix C) and the various structural features of the transaction, as well as

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 Structured Finance
to assess their effectiveness, including the structural protection provided by excess spread diverted
through the overcollateralization (OC) and interest coverage (IC) tests. Each model run considers
nine stress scenarios to account for different combinations of default timings and interest rate
stresses. The cash flow model was run using the PCM outputs for the indicative portfolio as well as
for the Fitch stressed portfolio.

Transaction documents provide the asset manager the flexibility to choose certain combinations of
covenants, including the minimum weighted average spread (WAS), maximum weighted average
rating factor (WARF), and minimum diversity score, toward which the portfolio will be managed.
More discussion on the use of these multiple parameters as a portfolio management tool can be
found in the Management to Dynamic Collateral Quality Tests section on page 8.

Interest Income
Fitch’s analysis of the indicative portfolio accounted for the actual spreads on the indicative
portfolio assets (including LIBOR floors) while the analysis of the Fitch stressed portfolio
assumed the floating-rate assets earn a spread of 3.7% over LIBOR, consistent with the initial
covenanted spread level that has been represented to Fitch, and excluding LIBOR floors. The
transaction documents permit a maximum of 5.0% of unhedged fixed-rate collateral, with a
minimum weighted average coupon (WAC) of 7.5%. There is an additional limit of 5.0% of
fixed-rate collateral that have asset specific interest rate hedges, which are considered floating-
rate obligations in the transaction for all purposes other than this concentration limitation. Fitch
did not stress this additional 5.0% fixed-rate collateral because the cash flows are expected to
mimic floating-rate securities.

Fitch tested two potential portfolios, one with 100% floating-rate assets and the other with 95%
floating-rate assets and 5% fixed-rate assets. The latter scenario resulted in the most
constraining break-even levels and, therefore, was considered to be the Fitch stressed portfolio.

The transaction allows up to 5.0% of the assets to pay interest less frequently than quarterly.
Assets are generally required to pay interest at least semiannually, except partial PIK securities
which may pay annually. The Fitch stressed portfolio assumed that 5.0% of the underlying
assets pay interest semiannually.

Overcollateralization and Interest Coverage Tests

The structure includes standard OC tests, IC tests and an interest diversion test. Failure of an OC or
IC test will result in interest or principal proceeds, as applicable, to be diverted to redeem the rated
notes sequentially. IC tests will not be applicable until the second payment date.

The interest diversion test is calculated the same way the class E OC test is calculated and is
applicable during the reinvestment period only. Upon failure of this test, the lesser of 50% of the
remaining interest proceeds or the required cure amount will be deposited into the principal
collection account for future reinvestment. The interest diversion test is placed before the
subordinated management fee in the waterfall.

Cash Flow Model Outputs

Break-even default rates (BDRs) show the maximum portfolio default rates class A debt could
withstand in stress scenarios without experiencing a loss. BDRs for class A debt were
compared with the PCM hurdle rate at the ‘AAAsf’ rating stress. A rating committee would
typically expect the BDR to be above the PCM hurdle rate to achieve a given rating.

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 Structured Finance
The table below presents the lowest BDR of the nine stress scenarios in the analysis of both
the indicative and Fitch stressed portfolios. Class A debt passed the ‘AAAsf’ PCM hurdle rate in
all nine stress scenarios when analyzing both the indicative and Fitch stressed portfolios, with
minimum cushions of 14.1% and 1.6%, respectively.

Additionally, Fitch analyzed a 100% floating rate Fitch stressed portfolio. The class A debt
passed the ‘AAAsf’ hurdle rate in all nine stress scenarios with a minimum cushion of 3.1%.

Fitch was comfortable assigning an ‘AAAsf’ rating to the class A debt because it believes the
debt can sustain a robust level of defaults combined with low recoveries, as well as other
factors, such as the strong performance of class A debt in the sensitivity scenarios and the
degree of cushion in the performance of these notes when analyzing the indicative portfolio.

PCM RDRs and Break-Even Default Rates

RRRs for the Fitch Portfolio Indicative Fitch Stresseda
Stressed Portfolio Class A A
Breakeven Default Rate (BDR) (%) 65.6 63.2
Rating RDR (%) RRR (%) Assumed Recovery Rate (RRR) (%) 40.4 37.7
AAAsf 61.6 37.7 PCM Hurdle Default Rate (RDR) (%) 51.5 61.6
AAsf 56.7 46.0
Default Cushion (%) 14.1 1.6
Asf 50.9 50.7
Default Timing Mid Mid
BBBsf 46.7 56.7
LIBOR Up Up
BBsf 39.9 66.2 a
Fitch stressed portfolio based on assumed nine-year WAL, 95% floating-rate assets paying a 3.70% WAS, 5% fixed-rate
Bsf 35.7 73.7 assets paying a 7.5% WAC and maximum second-lien, obligor and industry concentrations.

Rating Sensitivity
In addition to Fitch’s stated criteria, the agency analyzed the structure’s sensitivity to the potential
variability of key model assumptions. The rating sensitivity analysis is based on the Fitch stressed
portfolio. These sensitivities only describe the model-implied impact of a change in one or more of
the input variables. This analysis is designed to provide information about the sensitivity of the
rating to key model assumptions. It should not be used as an indicator of possible future
performance. The key model assumptions analyzed are described below.

Rating Sensitivity to Default Probability

A default probability multiplier of 125% and 150% is applied to the default probability of each obligor.

Rating Sensitivity to Recovery Rates

A multiplier of 75% and 50% is applied to loan-level recovery rates.

Rating Sensitivity to Correlation

A 2.0x base country correlation increase is applied.

Rating Sensitivity to Combined Stress

A default probability multiplier of 125%, recovery rate multiplier of 75%, and 2.0x base correlation for
the country are applied.

Rating Sensitivity to Asset Quality Matrix Points

Fitch tested two extreme points on the Moody's matrix, which features various WAS, WARF, and
diversity score combinations. The two matrix points tested were:

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 Structured Finance
• High credit quality/low WAS combination, where Fitch reduced the WAS to 2.5% and improved
the average credit quality of the portfolio to ‘BB/BB–’.
• Low credit quality/high WAS combination, where Fitch increased the WAS to 5.4% and
reduced the average credit quality of the portfolio to ‘B/B–’.

Rating Sensitivity
Class A Debt
Median Rating Lowest Rating
Rating Sensitivity to Default Probability − 125% DP Multiplier AA+ AA+
Rating Sensitivity to Default Probability − 150% DP Multiplier AA+ AA−
Rating Sensitivity to Recovery Rates − 0.75x RR Multiplier AA+ AA+
Rating Sensitivity to Recovery Rates − 0.50x RR Multiplier AA A+
Rating Sensitivity to Correlation − 2x Base Correlation Increase AAA AA+
Rating Sensitivity to Combined Stress − 125% DP Multiplier, 0.75x RR Multiplier and 2x Base Correlation Increase AA– A+
Rating Sensitivity to Matrix Point 1 (Higher Credit Quality/Lower Spread) AAA AAA
Rating Sensitivity to Matrix Point 2 (Lower Credit Quality/Higher Spread) AAA AAA

Portfolio Management
Cole Park CLO will have an approximately five-year reinvestment period, which is expected to
expire in October 2020. After the reinvestment period, as long as no event of default (EOD) has
occurred and is continuing and a restricted trading period is not then in effect, the manager may
reinvest proceeds from the sale of credit-risk obligations and unscheduled principal payments within
the later of 30 days after receipt of such proceeds and the last day of the collection period in which
such proceeds were received. Additional conditions must also be met, as outlined in the Conditions
to Reinvestment table on the next page.

Discretionary sales are permitted at any time, other than during a restricted trading period, if after
giving effect to such sale the aggregate principal balance of discretionary sales during the preceding
12-month period does not exceed 25% of the collateral principal amount as of the beginning of such
12-month period and subject to other conditions. The collateral manager will be permitted to sell
defaulted, credit-risk, and credit improved assets at any time, including after the reinvestment
period.

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 Structured Finance
Conditions to Reinvestment
During Reinvestment Period After Reinvestment Period
Type of Proceeds:
Scheduled/Unscheduled
Principal Payments, Type of Proceeds: Credit Risk Type of Proceeds:
Discretionary Sales or Credit Sales and Defaulted Unscheduled Principal Type of Proceeds: Credit
Improved Sales Obligations Proceeds Risk Sales
The WAS, WARR, and WAL tests are satisfied or, if failing, maintained
Collateral Quality
Satisfaction, or if failing, maintain or improve. or improved.
Tests
WARF test is satisfied.
Concentration
Satisfaction, or if failing, maintain or improve. Satisfaction, or if failing, maintain or improve.
Limitations

All overcollateralization ratio tests must be satisfied after giving effect

Coverage Tests Satisfaction, or if failing, maintain or improve.
to the reinvestment.

Maturity Each additional purchased obligation will have the same or earlier
N.A.
Requirements maturity as the related prepaid or sold obligation.
Either (x) the APA of all additional Either (x) the APA of all additional
In the case of sales proceeds, the collateral obligations purchased with Either (x) the APA of all additional collateral obligations purchased
APA of the collateral obligations plus such proceeds at least equals the collateral obligations at least with such proceeds at least equals
principal cash will be greater than or related sales proceeds or (y) the equals the amount of related the related sales proceeds or (y)
Par Amount
equal to either (x) the APA of all APA of all collateral obligations plus unscheduled principal payments or the APA of all collateral obligations
Requirements
collateral obligations plus principal principal cash is greater than or (y) the APA of all collateral plus principal cash is greater than
cash immediately prior to such sale equal to either (1) the RTPB or (2) obligations plus principal cash is or equal to either (1) the RTPB or
or (y) the RTPB. such amounts immediately prior to greater than or equal to the RTPB. (2) such amounts immediately
such sale. prior to such sale.
Rating Requirements N.A. N.A.
Restricted Trading
N.A. The restricted trading period is not in effect.
Period
The manager may only consent to a maturity extension if (A) after giving effect to such extension, the maturity of the asset will not be beyond the
stated maturity of the notes and (B) at least one of the following conditions is satisfied: (i) the extension is in connection with an insolvency,
bankruptcy, etc.; provided that the APA of all assets held by the issuer that are extended pursuant to this clause (i) may not exceed 5% of the
Amend and Extend target initial par amount; (ii) after such extension, the WAL test is satisfied; (iii) a majority of the controlling class consents to such extension; or
(iv) in the manager's reasonable judgment, not consenting to the extension will have a material adverse effect on the issuer or the notes; provided
that any maturity extension pursuant to this clause (iv) may not extend the maturity by more than 24 months (subject to clause (A) above).

WAS – Weighted average spread. WARR – Weighted average recovery rate. WAL – Weighted average life. WARF – Weighted average rating factor. N.A. − Not
applicable. APA − Aggregate principal amount. RTPB − Reinvestment target par balance. Note: Conditions to reinvestment outlined above assume additional assets
meet the definition of a collateral debt obligation as defined in the indenture.

Management to Dynamic Collateral Quality Tests

The minimum WAS, maximum WARF, and minimum diversity score covenants are subject to a
Moody’s asset quality matrix. The initial matrix point will be selected on or prior to the effective
date and can be changed by the collateral manager at any time thereafter provided that (i) if the
portfolio is in compliance with all three tests, it will continue to be in compliance with all three tests
at the new matrix point or (ii) if the portfolio is not in compliance with all three tests and would not
be in compliance with all three tests at any other matrix point, the degree of noncompliance with
each test must be maintained or improved at the new matrix point.

Fitch views several factors as mitigating the risk presented by the multitude of potential asset
quality parameters presented by the Moody’s collateral quality matrix. First, the construction of the
asset quality matrix is designed to allow for manager flexibility through various market scenarios
while maintaining similar overall portfolio risk characteristics. Consequently, the introduction of
additional portfolio risk should be mitigated with a concurrent tightening of another covenant; for
example, a lower average credit quality should be mitigated by an offsetting aspect, such as
higher spread and/or portfolio diversity. Second, Fitch has assessed the manager and gained
comfort with DFM’s ability to adequately manage the portfolio in accordance with the transaction
documents. Finally, Fitch has tested various sensitivity scenarios, as discussed in this report,
which highlight the strong performance of the notes in high default and/or low recovery scenarios.

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 Structured Finance
Additional Structural Features

Conversion of Class A-1 Loans

The class A-1 lenders will have the option to convert all or a portion of the class A-1 loans into an
equivalent amount of class A-1 notes. On the conversion date, the class A-1 loans would be
considered repaid in full and the class A-1 note balance will be increased accordingly. Interest
accrued on the class A-1 loans since the prior payment date until the conversion date will be
deemed outstanding on the converted class A-1 notes; interest will then accrue at the interest rate
applicable to the class A-1 notes from the conversion date and thereafter. No class A-1 notes
may be converted into class A-1 loans. Notwithstanding the foregoing, if such conversion would
require the collateral manager to comply with risk retention rules, they may object to such
conversion.

Repurchased/Surrendered Notes
The indenture prohibits the surrender or cancelation of any class of notes without payment
thereon eliminating the possibility of utilizing note cancelations to artificially improve coverage
ratios. There are no provisions for note repurchases by the Issuer.

Additional Issuance
At any time during the reinvestment period (or, if only additional subordinated notes and/or
junior mezzanine notes are being issued, at any time), the co-issuers may issue additional
existing secured notes, subordinated notes, or one or more new classes of notes that are
subordinated to the existing notes (junior mezzanine notes), subject to the following conditions,
inter alia:
• The collateral manager consents to such issuance.
• Each hedge counterparty (if any), a majority of the subordinated noteholders and, unless
only additional junior mezzanine notes and/or subordinated notes are being issued, a
majority of the controlling class consents to such issuance; provided that consent from
these parties is not required if the collateral manager has certified the aggregate principal
amount of each class of additional notes is equal to the minimum amount required to
comply with risk retention rules.
• If additional debt of existing secured debt is being issued, a majority of the class A debt
consents to such issuance; provided that consent is not required if the collateral manager
has certified (1) the aggregate principal amount of each class of additional notes is equal
to the minimum amount required to comply with risk retention rules and (2) if additional
class A notes are issued, the total aggregate principal amount of additional class A notes
issued in order to comply with risk retention rules does not exceed 33% of the original
outstanding principal amount of class A debt.
• Additional notes of all classes of secured notes must be issued proportionally across all
A disproportionate additional issuance of classes of notes. However, class A-1 loans and A-1 and A-2 notes may be issued in
class A-1 and class A-2 notes could result disproportionate amounts so long as total class A debt remains proportionate. Additional
in a change to the cost of funding for the
CLO and/or a change in the interest rate subordinated notes and junior mezzanine notes may be issued in an amount that exceeds
mismatch as compared to the underlying the proportion otherwise applicable to them.
collateral.
• Proceeds from an additional issuance shall be treated as principal proceeds to invest in
additional collateral during the reinvestment period or to be applied pursuant to the priority
of payments. In the case of an additional issuance of subordinated notes or junior
mezzanine notes, the investment manager may designate proceeds from such issuance
as principal proceeds or interest proceeds.

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 Structured Finance
• Additional issuances must be issued at a price at least equal to par and total additional
notes may not exceed the original outstanding principal amount of such notes.
• The terms of any additional notes issued must be identical to the terms of the existing
notes except that the interest rate may not be higher than the interest rate on the existing
class of notes.
• Each overcollateralization ratio test must be maintained or improved immediately after
giving effect to such issuance and the application of proceeds thereof.
• If class A debt is outstanding, an additional issuance of subordinated or junior mezzanine
notes must be issued in a minimum aggregate amount of $2,500,000 (unless a majority of
class A debt consent to a lesser amount) and a majority of class A debt must provide
consent, except that up to two additional issuances may occur without such consent.
• Additional issuances of existing classes of notes will be offered to existing noteholders on
a pro-rata basis, with additional A-1 notes being offered to A-1 lenders and A-1 holders on
a pro rata basis, except that additional notes issued will be offered to the collateral
manager in an amount necessary to comply with the risk retention rules, if applicable, prior
to any offer made to existing noteholders.

Fitch is credit neutral as to an additional issuance of notes which occurs in a proportionate

manner across all secured classes including class A debt because the terms of any notes
issued will be identical to the existing notes (or, have a lower interest rate) and the degree of
subordination would be expected to be maintained or improved.

An additional issuance of class A notes whereby additional class A-1 and A-2 notes are issued
in disproportionate amounts could result in a change to the cost of funding for the CLO and/or a
change in the interest rate mismatch as compared to the CLO’s underlying collateral. Fitch
would expect to analyze any impact of a future additional issuance and make comments or
adjustments to ratings as appropriate.

Redemption Price
The redemption price for each class of debt is equal to 100% of the aggregate outstanding
principal balance of the debt in addition to any accrued and unpaid interest to the redemption
date. In addition, the class A debt is entitled to a make-whole payment if they are redeemed
prior to the payment date in October 2018. The make-whole payment is equal to (i) the
aggregate outstanding amount of such class A debt, multiplied by (ii) the product of (A)(x) in
the case of the class A-1 loans and the class A-1 notes, the then-current spread over LIBOR
applicable to the class A-1 loans or class A-1 notes, as applicable, and (y) in the case of the
class A-2 notes, the then-current interest rate applicable to the class A-2 notes, and (B) the
number of days in the period from and including the applicable redemption date to but
excluding the payment date occurring in October 2018, divided by 360.

Optional Redemption/Refinancing
After the noncall period, at the written direction of a majority of the subordinated notes, all
classes of secured debt may be redeemed in whole either by a liquidation of the collateral or
the application of proceeds from a refinancing. A redemption using proceeds from a refinancing
will also require written consent from the collateral manager. An optional redemption of secured
debt in full is subject to the following conditions:
• Such optional redemption or refinancing may only occur to the extent that total proceeds
available for such redemption are sufficient to pay the redemption price for all classes of
secured debt respectively, plus all administrative expenses and fees due and owing

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 Structured Finance
pursuant to the priority of payments and any fees that would reasonably be incurred in
connection with the redemption.
• The subordinated notes may be redeemed after all classes of secured debt has been paid
in full at the written direction of the subordinated noteholders or the collateral manager
with consent of a majority of the subordinated noteholders.

In connection with a refinancing of all classes of debt, the subordinated noteholders may elect
to designate principal proceeds in an amount up to the excess, if any, of the collateral principal
amount over the reinvestment target par balance as interest proceeds for payment on the
redemption date.

Additional provisions allow a partial refinancing after the noncall period at the written direction
of a majority of the subordinated noteholders with written consent from the collateral manager.
Any class of debt being refinanced must be repaid in full but not in part at a price equal to the
redemption price and such payments will be made using proceeds from the refinancing (except
that the accrued interest portion may be paid using available refinancing interest proceeds),
and if such redemption is on a payment date, all other funds available for a redemption
pursuant to the priority of payments. Any partial refinancing would be subject to the following
conditions:
• If class A-2 notes are being refinanced, the fixed-rate of interest on the replacement notes
must be equal to or lower than the fixed-rate of interest on the existing class A-2 notes.
For all other classes of debt, the spread over LIBOR on refinancing replacement notes
must be equal to or lower than the spread over LIBOR on the existing class or classes of
secured debt being refinanced, respectively.
• The remaining terms of the refinancing replacement notes must be substantially the same
as the existing class or classes of notes being refinanced, including but not limited to the
aggregate outstanding amount of the notes, the stated maturity of the notes and ranking in
the priority of payments.

In the case of any full or partial redemption using refinancing proceeds, the collateral manager
must consent to such refinancing within 10 days of receiving written notice from the
subordinated noteholders. If the collateral manager consents to the refinancing, they must also
confirm that they will comply with the risk retention rules, if applicable. As discussed in the
Collateral Manager section on page 12, consent or non-consent from the collateral manager
could trigger a change in the subordinated management fees payable to the manager. If the
collateral manager consents to the refinancing, they will have the first right to purchase
refinancing replacement notes in an amount to comply with such risk retention rules.

Since exercise of an optional redemption or refinancing of all classes of notes is predicated on

a full repayment of the notes, the provisions do not introduce additional risk to the noteholders.
Fitch’s credit view on the partial refinancing provisions is neutral since (with the exception of a
reduced interest rate) the terms of the obligations providing the refinancing are required to be
substantially the same as the terms of the class of secured notes being refinanced.

Repricing of Notes
After the noncall period, a repricing of any class of secured debt may be directed by written
notice from a majority of the subordinated noteholders with consent from the collateral
manager. Such repricing would reduce the interest rate on an existing class of secured debt
and may also modify the existing noncall period. Other than a reduction in interest rate and/or a
modification to the noncall period, no terms may be modified in connection with a repricing. A
repricing is subject to the following conditions:

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Investors may be required to sell
their notes or have their notes
redeemed at a price equal to the
redemption price if they do not
consent to a proposed repricing.
Nonconsenting holders who do not
cooperate with the issuer to sell or
redeem their notes will be deemed
consenting holders and will be forced
to accept the lower interest rate on
the repriced notes.
Fitch views DFM as satisfactory for the
management of Cole Park CLO.
Cole Park CLO Limited/LLC
March 31, 2016
Structured Finance
• Notice must be sent to the holders of the debt proposed to be repriced at least 15 days
prior to such proposed repricing, and such notice may propose either (i) a revised spread
over LIBOR (or fixed-rate of interest in the case of the class A-2 notes) or (ii) a range of
spreads over LIBOR (or fixed rates of interest in the case of the class A-2 notes), with
respect to the debt proposed to be repriced, as applicable. The notice will also specify the
noncall period applicable to such class (which may be modified in connection with a
repricing) and the price at which any nonconsenting holders’ debt may be sold, transferred
or redeemed in connection with such repricing, which price shall be equal to the
redemption price.
• After receiving such repricing notice, holders may consent to the repricing or provide the
lowest repricing rate within the range provided at which they would provide consent.
• Holders who do not respond to the repricing proposal are deemed to be nonconsenting
holders and their debt will be sold, transferred or redeemed at the price specified in the
repricing notice. If any nonconsenting holder does not cooperate with the issuer to effect
the foregoing, they will be forced to retain the repriced debt.
• Nonconsenting holders’ debt will first be offered to the collateral manager in an amount
that would be necessary to comply with risk retention rules, if applicable.
• Consenting holders may elect to purchase remaining nonconsenting holders’ debt or their
holdings may be sold to new investors.
• Replacement notes having terms identical to the repriced debt may also be issued, with
the proceeds from the replacement notes used to redeem nonconsenting holders’ debt.
• To effect a repricing, (i) all nonconsenting holders’ debt must be sold, transferred or
redeemed and (ii) interest proceeds available to the subordinated noteholders must be
adequate to make payments of all expenses in connection with such repricing (or such
expenses may be paid by an entity other than the issuer).
Fitch does not believe the terms of a repricing permitted under the transaction documents
present additional credit risk for the class A debt.
Events of Default: Undercollateralization
On any measurement date, an event of default (EOD) will occur if the ratio of the aggregate principal
balance of the portfolio (with defaulted assets carried at market value) plus principal proceeds to the
aggregate outstanding amount of class A debt is less than 102.5%. If an EOD occurs under this
clause, holders of at least a majority of the controlling class may direct the sale and liquidation of the
portfolio.
Counterparty Risk
Collateral Manager
The transaction will be managed by DFM. As part of its analysis, Fitch’s Funds and Asset Manager
Ratings group evaluated DFM and determined its capabilities satisfactory in the context of the
ratings assigned to the transaction and the investment parameters that govern DFM’s activities (see
Appendix B on pages 17–18 for additional information).
As compensation for managing the portfolio, the collateral manager will receive (i) base
management fees of 15 bps per annum, (ii) subordinated management fees of 25 bps per annum
(subject to a step-up or step-down, as described below), and (iii) an incentive management fee of
12.5 bps per annum, which is payable from up to 50% of remaining proceeds once the subordinated
notes achieve a 12% internal rate of return (see the principal and interest waterfalls described in
detail in Appendix C on page 19).
12

Consent or nonconsent from the
collateral manager to a proposed
refinancing could trigger a step-up or
step-down, respectively, in the
subordinated management fees.
Structured Finance
The subordinated management fees will increase to 30 bps if the collateral manager consents to a
refinancing proposed by a majority of the subordinated noteholders and commits to comply with
then-current risk retention rules. To the contrary, if the collateral manager does not provide consent
to a refinancing, its subordinated management fees may be reduced to (i) 20 bps if the proposed
refinancing is prior to the payment date in October 2018, or (ii) 15 bps if the proposed refinancing is
on or after the payment date in October 2018. Notwithstanding the foregoing, if a proposed
refinancing would not require the manager to comply with risk retention rules in connection with such
refinancing, there would be no change to the subordinated management fees, regardless of whether
the manager provides consent.

The collateral management fees are mostly in line with those of recent CLOs. The fee arrangements
would be an important factor in facilitating the replacement of the collateral manager if this becomes
necessary for any reason.

Hedge Counterparties
The floating-rate notes and indicative assets reference the same index, minimizing basis risk.
No hedging strategies are included in the analysis at this time. Fitch would evaluate any credit
implications of future entry into a hedge agreement at such time.

Other Counterparties
Provisions for the eligible investments to be purchased with intraperiod interest and principal
collections and for institutions at which the issuer’s various bank accounts conform to Fitch’s
counterparty criteria for supporting note ratings of ‘AAAsf’. Requirements for other counterparties
such as the trustee, collateral administrator and custodian, also conform to Fitch criteria.

Transaction and Legal Structure

The notes will be issued by Cole Park CLO Limited and Cole Park CLO LLC, which are
bankruptcy-remote, special-purpose vehicles organized under the laws of the Cayman Islands
and Delaware, respectively. The notes are secured by the underlying loan portfolio. Payments
will be made quarterly to the notes and are expected to begin in April 2016.

Transaction Structure

GSO/Blackstone Debt Funds Class A-1 Loans and Class A-1

Management LLC and A-2 Notes
(Collateral Manager)

Class B Notes

Sale of Loans Principal and Class C Notes

to Issuer Interest
Loan Portfolio Cole Park CLO Limited/LLC
$425 Million High (Issuer/Co-Issuer)
Yield Loans Class D Notes
Note Proceeds
Note Proceeds
(for Loan Purchase)

Class E Notes

State Street Bank and

Subordinated Notes
Trust Company
(Trustee and Collateral
Administrator)

Source: Transaction documents.

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Regulatory Matters
The transaction documents contain provisions designed to address Section 13 of the U.S. Bank
Holding Act of 1956 (the Volcker Rule). According to the documents, the issuer will initially rely on
section 3(c)(7) of the U.S. Investment Company Act of 1940 for its exemption from registration as an
investment company, possibly causing the issuer to be considered a “covered fund” and, thus, be
subject to the Volcker Rule.

To address Volcker Rule concerns, the transaction does not permit the purchase of bonds unless
the permitted securities condition is satisfied. The permitted securities condition is satisfied if (a) the
issuer and the collateral manager have received an opinion of counsel that: (i) assuming the issuer
is a “covered fund”, none of the secured notes shall be considered an “ownership interest” therein
(in each case, as such terms are defined for purposes of the Volcker Rule); or (ii) the issuer will not
be considered a “covered fund” (as defined in clause (a)(i) above); (b) any amendments or
supplements to the indenture that are necessary for the issuer to receive the opinion described in
clause (a) above shall have become effective; and (c) a majority of the controlling class consents in
writing to the application of the permitted securities condition.

The issuer cannot purchase letters of credit under any circumstances.

Disclaimer
For the avoidance of doubt, Fitch relies, in its credit analysis, on legal and/or tax opinions provided
by transaction counsel. As Fitch has always made clear, Fitch does not provide legal and/or tax
advice or confirm that the legal and/or tax opinions or any other transaction documents or any
transaction structures are sufficient for any purpose. The disclaimer at the foot of this report makes it
clear that this report does not constitute legal, tax, and/or structuring advice from Fitch and should
not be used or interpreted as legal, tax, and/or structuring advice from Fitch. Should readers of this
report need legal, tax, and/or structuring advice, they are urged to contact relevant advisers in the
relevant jurisdictions.

Criteria Application, Model and Data Adequacy

Criteria Application
The key criteria report used is “Global Rating Criteria for CLOs and Corporate CDOs,” available on
Fitch’s website at www.fitchratings.com. Additional criteria used in Fitch’s analysis are listed on page
1.

Model
The credit analysis followed a two-step process. First, the agency analyzed the portfolio’s default
and recovery probabilities using Fitch’s PCM. Second, Fitch analyzed the structure using its
proprietary cash flow model as customized for the transaction’s specific structural features, both in
accordance with the CLO and corporate CDO criteria.

Data Adequacy
Fitch utilized publicly available information to provide credit opinions on 24.6% of the underlying
public companies. In addition, Fitch publicly rates 9.9% of the portfolio. The information utilized in
Fitch’s analysis is as of Dec. 7, 2015.

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 Structured Finance
Fitch’s credit opinions and recovery ratings are produced by the Corporates group and reviewed by
a rating committee.

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, paying particular attention to restructurings and recoveries.
• Portfolio migration, including assets being downgraded to ‘CCC’ or portions of the portfolio
being placed on Rating Watch Negative or Rating Outlook Negative.
• 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 website at
www.fitchratings.com.

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 Structured Finance

Appendix A: Transaction Overview

Cole Park CLO Limited/LLC U.S./Structured Credit

Capital Structure

Interest PMT Final

a
Class Rating Outlook Size (%) Size ($ Mil.) CE (%) Rate Frequency Maturity
b
A-1 Loans AAAsf Stable 12.2 53.00 36.5 3mL + 1.50 Quarterly October 2028
A-1 Notesb AAAsf Stable 46.3 202.00 36.5 3mL + 1.50 Quarterly October 2028
A-2 AAAsf Stable 3.4 15.00 36.5 3.13 Quarterly October 2028
B NR N.A. 11.6 50.50 24.6 3mL + 2.25 Quarterly October 2028
C NR N.A. 4.9 21.25 19.6 3mL + 3.00 Quarterly October 2028
D NR N.A. 6.1 26.75 13.3 3mL + 3.90 Quarterly October 2028
E NR N.A. 5.4 23.50 7.8 3mL + 6.10 Quarterly October 2028
Subordinated Notes NR N.A. 10.1 43.82 N.A. Residual Quarterly October 2028
Total 100.0 435.82
a b
Based on the target par amount of $425.0 million. Class A-1 loans include a conversion option to convert all or a portion of class A-1 loans into an equivalent amount of
class A-1 notes. The balance of class A-1 notes may be increased up to $255 million upon conversion. NR − Not rated. N.A. − Not applicable. 3mL – Three-month LIBOR.

Scheduled Revolving Period 4.9 Years Swaps None

Scheduled Noncall Period 1.9 Years

Key Information
Details: Parties:
Closing Date Dec. 7, 2015 Arranger Deutsche Bank Securities Inc.
Country of Assets and Type U.S. Leveraged Loans Trustee and Collateral Administrator State Street Bank and Trust Company
Country of SPV Cayman Islands Asset Manager GSO / Blackstone Debt Funds Management LLC
Primary Analyst Amy Drobish Issuer and Co-Issuer Cole Park CLO Limited and
+1 212 908-9194 Cole Park CLO LLC
Secondary Analyst Erika Tsang, CFA
+1 212 908-0817
Fund and Asset Manager
Ratings Analyst Russ Thomas
+1 312 368-3189

Key Rating Drivers

Sufficient Credit Enhancement: Credit enhancement (CE) of 36.5% for class A Transaction Structure
debt, in addition to excess spread, is sufficient to protect against portfolio
default and recovery rate projections in the ‘AAAsf’ stress scenario. The degree GSO/Blackstone Debt Funds Class A-1 Loans and Class A-1
of CE available to the class A debt is in line with the average CE of recent CLO Management LLC and A-2 Notes
(Collateral Manager)
issuances and cash flow modeling results indicate performance in line with
Class B Notes
other Fitch-rated ‘AAAsf’ CLO notes.
‘B+/B’ Asset Quality: The average credit quality of the indicative portfolio is
Class C Notes
‘B+/B’, which is comparable to recent CLOs. Issuers rated in the ‘B’ rating Sale of Loans
to Issuer
Principal and
Interest
Loan Portfolio Cole Park CLO Limited/LLC
category denote a highly speculative credit quality. However, in Fitch Ratings’ $425 Million High (Issuer/Co-Issuer)
Yield Loans Class D Notes
opinion, class A debt is unlikely to be affected by the foreseeable level of Note Proceeds
Note Proceeds
(for Loan Purchase)
defaults. Class A debt is projected to be able to withstand default rates of up to
Class E Notes
63.2%.
Strong Recovery Expectations: The indicative portfolio consists of 97.0% State Street Bank and
Subordinated Notes
senior secured loans. Approximately 92.6% of the indicative portfolio has strong Trust Company
(Trustee and Collateral
recovery prospects or a Fitch-assigned recovery rating of ‘RR2’ or higher and Administrator)
the base case recovery assumption is 77.4%. In determining ratings for class A
debt, Fitch stressed the indicative portfolio by assuming a higher portfolio
Source: Transaction documents.
concentration of assets with lower recovery prospects and further reduced
recovery assumptions for higher rating stresses resulting in a 37.7% recovery
rate assumption in Fitch’s ‘AAAsf’ scenario.

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Appendix B: Collateral Manager Profile Report  The Fitch View

GSO / Blackstone Debt Funds Management LLC (DFM)

Strengths
• Integrated platform ensures access to all areas of credit research and institutional knowledge across GSO.
• Highly diversified credit asset management business with access to retail and institutional investors across many market segments.
• One of the largest secured loan managers by AUM, which provides dealer coverage, leading new issue allocations and good
execution.
• Demonstrated track record managing CLOs, combined with tenured and experienced professional team at all levels.

Challenges
• To maintain CLO AUM at current levels, given natural runoff of legacy CLOs and loan market dynamics that lead to longer portfolio
ramping times.
• To maintain stability among key staff and preserve talent pool among increasing industry competition.

Company
• DFM is a wholly owned subsidiary of GSO that focuses on long-only credit strategies. GSO was founded in 2005 and subsequently
acquired by Blackstone in 2008. GSO represents the credit investment business of Blackstone, which had $284.4 billion in AUM
across private equity, real estate, credit and hedge fund strategies as of Sept. 30, 2014. Significant global presence at the
Blackstone group level, with over 2,100 employees in 24 offices worldwide.
• GSO is one of the world’s largest credit managers, focused on leveraged finance, with $67.8 billion in AUM as of Sept. 30, 2014.
• With $18.9 billion in AUM, the CLO business resides in the Customized Credit Strategies (CCS) group ($30.4 billion in AUM) at
GSO. The CCS product platform includes 44 CLOs (many of which GSO has assumed management contracts over), separately
managed accounts, small-cap direct lending funds, publicly listed permanent capital vehicles, closed-end funds and an exchange-
traded fund.
• CCS has 70 investment professionals with offices located in New York, Dublin and London.
• Senior portfolio managers have over 20 years of investment experience.

Investments
• Organizational structure at GSO facilitates economies of scale and knowledge sharing with respect to resources, credit research and
investment ideas.
• The investment process is based on a bottom-up approach, with a focus on credit research and technical inputs, the goal being to
preserve capital, take advantage of par building opportunities and generate stable equity distributions throughout the life of the CLO.
• Thirty-one research analysts cover credits by industry and are grouped together into teams, headed by team leaders and sector-
focused portfolio managers.
• The U.S. investment committee, which meets at least on a daily basis, consists of one managing director and four portfolio
managers.
• Clear, well-defined roles and responsibilities, along with access to a wide range of resources, allow for efficient decision making.

Controls
• Portfolio managers select investments using considerations such as relative value, portfolio objectives and constraints, asset
allocation and absolute yield.
• Any investment that passes the investment committee is formally assigned a risk rating that is monitored and formally reviewed at
least once per quarter.
• Research is maintained in a central database, and any changes are broadcast to the entire group.
• The formalized surveillance process includes daily investment team meetings, weekly portfolio analysis and strategy meetings and a
formal semiannual review of each credit. This process also includes quarterly and ongoing CLO waterfall and investment watchlist
analysis.

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 Structured Finance
• The formalized watchlist process includes categorization of issuers into: defaulted, high probability for loss and potential for
nonpayment. Watchlist managers monitor and communicate the status of each watchlist credit to portfolio managers.

Operations
• GSO utilizes a variety of systems for portfolio management and administration including Wall Street Office and Black Mountain
Everest for performing credit analysis.
• Dedicated CLO compliance team that populates and distributes numerous weekly reports including watch lists and compliance
tests.
• GSO’s processes include the reconciliation of cash and a monthly securities reconciliation with the trustee. Strong relationship and
constant communication with the trustee. PMs receive monthly reconciliation with the trustee report for review.
• Investor reporting includes quarterly commentary as well as trustee reports, all available on the trustee website.
• GSO’s funds operate with numerous administrators.

Technology
• Integrated and flexible platform based on a combination of proprietary analytics and third-party customized vendor systems including
widely accepted industry systems such as Fact Set Black Mountain Everest, Clear Par and Wall Street Office.
• Business continuity plan is appropriate and has been tested.

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Appendix C: Priority of Payments

Waterfalls
Interest Waterfall Principal Waterfall
Taxes and governmental fees, then administrative expenses Taxes and governmental fees, then administrative expenses up to cap
1 1
up to cap (0.02% plus $200,000 p.a.). (0.02% plus $200,000 p.a.).

2 Base management fee (0.15% p.a.). 2 Base management fee (0.15% p.a.).
3 Hedge counterparty amounts. 3 Hedge counterparty amounts.
4 Class A-1 loans, A-1 notes, and A-2 notes interest, pro rata. 4 Class A-1 loans, A-1 notes, and A-2 notes interest, pro rata.
5 Class B interest. 5 Class B interest.
6 Class A/B coverage tests. 6 Class A/B coverage tests.
7 Class C interest. 7 If class C notes are the controlling class, class C interest.
8 Class C deferred interest. 8 If class C notes are the controlling class, class C deferred interest.
9 Class C coverage tests. 9 Class C coverage tests.
10 Class D interest. 10 If class D notes are the controlling class, class D interest.
11 Class D deferred interest. 11 If class D notes are the controlling class, class D deferred interest.
12 Class D coverage tests. 12 Class D coverage tests.
13 Class E interest. 13 If class E notes are the controlling class, class E interest.
14 Class E deferred interest. 14 If class E notes are the controlling class, class E deferred interest.
15 Class E OC test. 15 Class E OC test.
During the reinvestment period, interest diversion test; if failing,
the lesser of (i) 50% of remaining proceeds and (ii) the If the Moody's rating condition is not satisfied, to redeem notes in
16 16
required cure amount to the principal collection account for the accordance with the debt payment sequence.
purchase of additional collateral.
(A) On a redemption date (other than a special redemption or
refinancing), to redeem the applicable notes in accordance with
If the Moody's rating condition is not satisfied, to redeem notes
17 17 the debt payment sequence; (B) on any other payment date, to
in accordance with the debt payment sequence.
use principal proceeds that the manager cannot reinvest to
redeem notes in accordance with the debt payment sequence.
During the reinvestment period (and after the reinvestment period
with respect to principal proceeds from unscheduled principal
18 Subordinated management fee (initially 0.25% p.a.a). 18
payments and sales proceeds from credit risk obligations), to
reinvest.
First, any expenses incurred in connection with a refinancing After the reinvestment period, to make payments in accordance
19 19
or repricing; second, unpaid administrative expenses. with the debt payment sequence.

20 Unpaid amounts to hedge counterparties. 20 Unpaid subordinated management fee.

21 Subordinated notes until a 12% IRR is achieved. 21
First, up to 50% of remaining proceeds to pay the incentive
22 management fee (0.125% p.a.); second, the remaining 22
proceeds to be paid to the subordinated notes.
First, any unpaid expenses incurred in connection with a
refinancing or repricing; second, any unpaid administrative
expenses.
Any unpaid hedge counterparty amounts.

23 Subordinated notes until a 12% IRR is achieved.

First, up to 50% of remaining proceeds to pay the incentive
24 management fee; second, the remaining proceeds to be paid to the
subordinated notes.
p.a. – per annum; IRR – Internal rate of return; Debt payment sequence: (i) class A-1 loans, class A-1 notes and class A-2 notes principal, pro rata, (ii) class B
principal, (iii) class C interest, (iv) class C deferred interest, (v) class C principal, (vi) class D interest, (vii) class D deferred interest, (viii) class D principal, (ix)
class E interest, (x) class E deferred interest, and (xi) class E principal. aIn connection with a refinancing proposal, if the collateral manager consents to the
refinancing, the subordinated management fee will increase to 0.30% p.a., or if the collateral manager does not consent to the refinancing, the subordinated
management fee will decrease to 0.20% p.a. if such event occurs prior to the October 2018 payment date or 0.15% p.a. if it occurs after the October 2018
payment date.

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Appendix D: Collateral Quality Tests, Concentration Limitations and Coverage Tests

Notable Concentration Limitations

Description Limit
Minimum % of Senior Secured Loans (excluding second-lien loans), Cash and Eligible Investments 90.0
Maximum % of Second Lien Loans and Unsecured Loans 10.0
Maximum % of Bonds (only if the permitted securities condition is satisfied) 5.0
Maximum % of Assets that Pay Less Frequently than Quarterly (other than partial PIK securities which may pay annually) 5.0
Maximum % of Fixed Rate Assets 5.0
Maximum % of Asset Specific Hedged Obligations 5.0
Maximum % of Partial PIK Securities 2.5
Maximum % of Discount Obligations 25.0
Maximum % of Obligations Rated ‘Caa1’ or Below by Moody's 7.5
Maximum % of Obligations Rated ‘CCC+’ or Below by S&P 7.5
Maximum % of DIP Collateral Obligations 5.0
Minimum % of U.S. Obligors 80.0
Minimum % of U.S. and Canada Obligors 90.0
Minimum % of U.S., United Kingdom and Canada Obligors 95.0
Maximum % of Unfunded Commitments Under Delayed Drawdown Loans and Revolving Loans 10.0
Maximum % of Each of the Top Five Obligors 2.5
Outside of the Top Five Obligors, Maximum % of Each Obligor 2.0
Maximum % of Second-Lien Loans and Unsecured Loans issued by a Single Obligor 1.0
Maximum % of Covenant-Lite Loans 55.0
Maximum % of Largest Moody’s Industry 15.0
Maximum % of Second Largest Moody’s Industry 12.0
Outside of the Largest Two Moody’s Industries, Maximum % of Single Moody’s Industry 10.0
Maximum % of Current Pay Obligations 2.5
Maximum % of Participation Interests 10.0
Maximum % of Assets Issued by Issuer with Total Potential Indebtedness >= $150 Million and < $250 Million 10.0

Notable Prohibited Asset Types

Description Limit
Maximum % of Bonds (unless the permitted securities condition has been satisfied) 0.0
Maximum % of Letters of Credit 0.0
Maximum % of Equity Securities or Bridge Loans 0.0
Maximum % of Interest Only Securities or Zero Coupon Bonds 0.0
Maximum % of Step-Up or Step-Down Obligations 0.0
Maximum % of Deferrable Securities (unless it is an exchanged deferrable security) 0.0
Maximum % of Leases 0.0
Maximum % of Synthetic or Structured Finance Securities 0.0
Maximum % of Long-Dated Assets 0.0
Maximum % of Assets Issued by an Obligor Domiciled in Greece, Italy, Portugal or Spain 0.0
Maximum % of Assets that Pay Interest Less Frequently than Semiannually (other than a partial PIK security) 0.0
Maximum % of Assets Issued by an Issuer with Total Indebtedness Below $150 Million 0.0
Maximum % of Assets Rated Below ‘Caa3’ by Moody’s or Below ‘CCC-’ by S&P 0.0
Maximum % of Assets Purchased Below 65% of its Principal Balance 0.0
Maximum % of Margin Stock 0.0

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 Structured Finance
Appendix D: Collateral Quality Tests, Concentration Limitations and Coverage Tests (continued)

Collateral Quality Tests

Description Limit
Minimum Weighted Average Spread (at Close %) 3.7; Subject to Matrix and a Minimum of 2.0
Minimum Weighted Average Coupon (%) 7.5
Maximum Weighted Average Life (Years) 9.0 (Declining)
Moody's Minimum Weighted Average Recovery Rate Test (at Close %) 44.0
Maximum Moody's Weighted Average Rating Factor (at Close) 2661; Subject to Matrix and a Maximum of 3350
Minimum Moody's Diversity Test (at Close) 60; Subject to Matrix

Coverage Tests
(%)
a
Test Trigger Definition
OC
Class A/B 122.6 ACPA divided by A + B.

Class C 116.4 ACPA divided by A + B + C (including class C deferred interest amounts).

Class D 109.3 ACPA divided by A + B + C + D (including class C and D deferred interest amounts).

Class E 103.4 ACPA divided by A + B + C + D + E (including class C, D and E deferred interest amounts).

Reinvestment
Interest Diversion 104.9 ACPA divided by A + B + C + D + E (including class C, D, and E deferred interest amounts).
IC
Class A/B 117.5 Interest proceeds and expected interest income minus senior expenses, divided by interest due to class A and class B notes.
Interest proceeds and expected interest income minus senior expenses, divided by interest due to class A, class B, and class C notes
Class C 112.5
(excluding deferred interest but including interest on deferred interest).
Interest proceeds and expected interest income minus senior expenses, divided by interest due to class A, class B, class C, and
Class D 107.5
class D notes (excluding deferred interest but including interest on deferred interest).
Par Value EOD
Class A 102.5 Aggregate principal balance of the collateral portfolio (assets treated at par, except defaulted treated at market value) divided by A.
a
A equals class A-1 loans and class A-1 and A-2 principal amounts outstanding, B equals class B principal amount outstanding, C equals class C principal amount
outstanding, D equals class D principal amount outstanding, E equals class E principal amount outstanding. Note: Adjusted collateral principal amount (ACPA) equals
the aggregate principal balance of assets + principal cash. Assets are generally included at their par value, except: defaulted assets, deferring assets and current pay
obligations in excess of 7.5% of the collateral principal amount are included at the lesser of (i) Moody’s recovery amount or (ii) market value; discount obligations are
included at their purchase price; long dated securities, exchanged deferrable securities in excess of 10% of the collateral principal amount and assets that have been
defaulted for 3 years or more are not included; and the greater of assets rated 'Caa1' and below by Moody's in excess of 7.5% or assets rated ‘CCC+’ or below by S&P
in excess of 7.5% are included at market value.
Source: Transaction documents

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 Structured Finance

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