Fitch Ratings has assigned the following rating and Rating Outlook to ZAIS CLO 4, LIMITED:

--$90,675,661 revolving notes 'AAsf'; Outlook Stable.

Fitch does not rate the preference shares.

TRANSACTION SUMMARY

ZAIS CLO 4, LIMITED (ZAIS 4, or the borrower) is a term facility originally closed on Feb. 25, 2015. The facility was structured with investment parameters that were generally similar to CLO issuance in that time period. Credit extended by lenders in the form of funded loans, in addition to proceeds from the issuance of the revolving notes, were used to purchase a portfolio of broadly syndicated loans.

The facility is managed by ZAIS Leveraged Loan Manager 4, LLC (ZAIS, a relying adviser of ZAIS Group, LLC). As part of its analysis, Fitch's Funds and Asset Manager Ratings group (FAM) evaluated ZAIS and determined its capabilities satisfactory in the context of the rating assigned to this transaction and the investment parameters that govern its activities. The facility's investment period expired in August 2015, and no further reinvestment is permitted.

Fitch's analysis of the revolving notes included the timely payment of both the interest (LIBOR + 1.10%) and supplemental interest (0.65%) due under the priority of payments. In determining the rating of the revolving notes, no changes were made to the current portfolio since no further reinvestments are permitted. Fitch also considered a stress case to cash flows by assuming distressed loan market values for the remaining life of the deal, thereby triggering the supplemental interest coupon to increase to its maximum level of 1.9%. The revolving notes have been assigned a Stable Outlook based on Fitch's expectation of steady performance through anticipated levels of default and the credit enhancement available to the notes.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 28.0% for the revolving notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a 'AAsf' stress scenario. The degree of CE available to the revolving notes is higher than the average CE of recent CLO issuances of 'AA' tranches.

'B+/B' Asset Quality: The average credit quality of the current portfolio is 'B+/B', which is slightly better than that of recent CLOs. Issuers rated in the 'B' rating category denote a highly speculative credit quality; however, the revolving notes are unlikely to be affected by the foreseeable level of defaults. The revolving notes are projected to be able to withstand default rates of up to 50.1%.

Strong Recovery Expectations: The current portfolio consists of 100.0% first lien senior secured loans. Approximately 96% of the portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, and the base case recovery assumption is 80.5%. The analysis of the revolving notes assumed a 52.7% recovery rate in Fitch's 'AAsf' scenario.

RATING SENSITIVITIES

Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. These sensitivities were conducted under the framework of the six sensitivities outlined in Fitch's 'Global Rating Criteria for CLOs and Corporate CDOs'. An additional sensitivity analyzed the structure's ability to withstand a liquidation of the highest quality loans in the portfolio over the next six months, reducing the portfolio to half its current notional and thereby increasing default rates while decreasing recovery rates. Fitch expects the revolving notes to maintain investment grade ratings even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'BBB+sf' and 'AAAsf' for the revolving notes.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

The publication of a representations, warranties and enforcement mechanisms appendix is not required for this transaction.

Additional information is available at www.fitchratings.com.

Sources of Information:

The information used to assess this rating was provided by the administrative agent, Royal Bank of Canada, and the public domain.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Global Rating Criteria for CLOs and Corporate CDOs (pub. 12 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873664

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997560

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997560

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.