Ares Leveraged Investment Fund, a market value collateralized debt obligation managed by Ares Management, has been upgraded by Fitch Ratings, bringing two of its tranches back to its original ratings. The move comes on the heels of better-than-expected performance and a waiver on outstanding debt. The market value fund was downgraded by Fitch in October last year following a significant decline in the value of the assets, causing failure in the quarterly minimum net worth tests and over-collateralization tests, according to Fitch. David Sachs, a portfolio manager with Ares, did not return calls.
The failure of the tests was remedied a month later through a limited waiver agreed upon by the senior lenders and noteholders that waived current and future compliance with the provisions of the minimum net worth covenant, as well as the over-collateralization tests. Ares also provided a schedule of asset sales and senior debt repayment that called for full repayment of the revolving credit facility and the class A notes by the end of this year, according to Fitch.
Earlier this month, several of the fund's senior lenders and noteholders executed an amended and restated limited waiver that extended 75% of the senior debt outstanding to a final maturity date of May 2004. The 25% of non-extending senior creditors are scheduled to be paid back on the maturity date established by the first limited waiver. In addition to the waiver, the fund benefited from the relative stabilization of the high-yield and loan markets, the successful execution of asset sales relative to the marks represented on each valuation report and the realization of gains from the initial public offerings of some of its largest investments, according to Fitch.