MOODY'S DOWNGRADES FIRST INTERNATIONAL BANK SMALL BUSINESS LOAN DEALS
Moody's Investors Service downgrades 11 classes of notes issued in four securitizations of SBA 7(a) and conventional small business loans sponsored by First International Bank (FIB), a wholly owned subsidiary of UPS Capital. The ratings actions are due to the recent deterioration in credit performance of the pools, which have a large concentration in the manufacturing sector. The complete ratings actions are as follows:
Issuer: First National Bank of New England SBA Loan-Backed Trust 1998-1
$9.47 million Class A Notes, rating confirmed at Aa3
$1.05 million Class B Notes, rating confirmed at Baa2
Issuer: First International Bank Trust 1999-1
$18.86 million Class A Notes, downgraded to Aa3 from Aaa
$1.68 million Class M Notes, downgraded to Ba2 from A2
$0.42 million Class B Notes, downgraded to B3 from Ba3
Issuer: First International Bank Trust 2000-1
$21.46 million Class A Notes, downgraded to A1 from Aaa
$1.90 million Class M Notes, downgraded to Ba2 from A2
Issuer: First International Bank Trust 2000-2
$23.30 million Class A Notes, downgraded to Aa3 from Aaa
$2.02 million Class M Notes, downgraded to Baa3 from A2
Issuer: FNBNE Business Loan Trust 1998-A
$1.34 million Class B Notes, rating confirmed at Baa2
Issuer: FIB Business Loan Trust 1999-A
$1.22 million Class M-1 Notes, rating confirmed at A2
$1.22 million Class M-2 Notes, rating confirmed at Baa3
Issuer: FIB Business Loan Trust 2000-A
$29.59 million Class A Notes, downgraded to A1 from Aaa
$1.48 million Class M-1 Notes, downgraded to Ba2 from A2
$1.48 million Class M-2 Notes, downgraded to B1 from Baa2
$1.86 million Class B Notes, downgraded to Caa2 from Ba2
FIB's pools have been adversely impacted by the recession in the manufacturing sector, which has been in a slump since the fourth quarter of 2000. Most affected are the 2000-1 and 2000-A transactions, which have delinquencies over 60 days of 28% and 25%, respectively as of December 2002. The 2000-1 deal has experienced 8% net losses to date, while the 2000-A deal has losses of 10.5%. The Class A securities in both transactions are downgraded to A1 from Aaa, based on the remaining subordination and excess spread available. However, the subordinate securities in both transactions are no longer considered investment grade by Moody's.
The 1999-1 and 2000-2 deals have experienced a lower level of losses to date: 3.6% for 1999-1 and 1% for 2000-2. However, the 1999-1 and 2000-2 deals have high current delinquencies with the 60+ delinquency rate for the 1999-1 deal at 27% and 18% for 2000-2. Based on a high level of problem loans, the senior securities in both deals are downgraded to Aa3 from Aaa with the subordinate securities in the 1999-1 deal downgraded to below investment grade.
The ratings of the 1998-1, 1998-A, and 1999-A are confirmed at their original levels, based on the performance of the pools relative to the available protection; the deals have reserve accounts of 8%, 13%, and 9% of the current principal balance for the three deals, respectively. Although losses are higher than expected for the 1998-1 and 1999-A deals, excess spread has absorbed the losses. Moreover, the three deals have paid down rapidly, with the pool factor for the 1998-1 deal at 39%; 35% for 1998-A; and 49% for 1999-1.
FIB (formerly First National Bank of New England) was acquired by UPS Capital in August 2001. UPS Capital is a wholly owned subsidiary of United Parcel Service, Inc.
The notes were sold in a privately negotiated transaction without registration under the Securities Act of 1933 (the Act) under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A.
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