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05 Aug 2013
Moody's also places on review for upgrade the ratings on another 31 tranches in 15 TruPS CDOs
New York, August 05, 2013 -- Moody's Investors Service announced today that it has upgraded the ratings
on 36 tranches in 16 collateralized debt obligation backed by Trust Preferred
Securities (TruPS CDOs), totaling approximately $3.89
billion of outstanding rated balance. The magnitude of the upgrades
ranged between one to three notches. Moody's simultaneously
placed on review for upgrade the ratings on all of the upgraded tranches.
In addition, Moody's placed on review for upgrade the ratings on
another 31 tranches in 15 TruPS CDOs, totaling approximately $2.95
billion of outstanding rated balance. A list of securities affected
by today's actions is included below:
Excel File: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF338453
RATINGS RATIONALE
Moody's explained that today's rating actions on the affected TruPS CDOs
are primarily a result of the recent substantial deleveraging of senior
notes, increases in the overcollateralization (OC) ratios,
and improvements in the credit quality of the underlying portfolios.
Both the unscheduled redemptions of underlying bank assets and diversions
of excess interest to cure OC test failures have contributed to the deleveraging
of senior notes and OC improvements in these transactions. Further,
many underlying TruPS issuers that had previously been deferring assets
have recently cured their deferrals and resumed paying interest,
which also improved the OC ratios. Lastly, the portfolio
weighted average rating factors (WARFs) in the affected TruPS CDOs have
declined substantially, reflecting improvements in the credit quality
of the underlying banks.
Moody's notes that the senior notes in the affected CDOs have been paid
down significantly during the last 12 months, due to faster than
expected redemptions of underlying assets and the continued diversion
of excess interest proceeds to pay down the notes . Some of the
deferring banks that were previously treated as defaulted in our analysis
have resumed interest payments and repaid all accrued deferred interest
on their TruPS, while a few others have redeemed their TruPS at
par. As a result of both redemptions and the curing of interest
deferrals on the underlying TruPS, the par coverage for the senior
notes in the affected transactions has improved significantly .
Moody's also notes that the affected deals benefited from an improvement
in the credit quality of the underlying portfolios. Based on Moody's
calculations, the average WARF in the affected transactions has
improved by about 350 points since the last reviews.
To identify and analyze the affected transactions, Moody's examined
primarily the extent of OC increases for each tranche and WARF improvements
in a total of 88 outstanding bank TruPS CDOs since the last reviews.
In addition, Moody's considered the following key portfolio-
and tranche-level parameters:
- Amount of cash in the principal collections account;
- Amount of cash in the interest collections account;
- Notional and maturity of outstanding interest rate swaps;
- Absolute OC level for each tranche in relation to its current
rating;
- Portfolio WARF level;
- Exposure to assets that are defaulted or deferring interest;
- Other idiosyncratic deal features if applicable
All of the tranches upgraded remain on review for upgrade, pending
comprehensive analysis of each affected TruPS CDO. Moody's endeavors
to complete its analyses of all affected deals within 90 days.
While in some cases Moody's did not place the ratings on all tranches
from the same deal on review for upgrade, the rating agency will
review the entire capital structure when it conducts a full analysis of
each deal and take rating actions when warranted.
All deals affected today are TruPS CDOs that are mainly backed by bank
TruPS. 15 of 26 deals are backed solely by bank TruPS and the remaining
deals contain over 65% of bank TruPS collateral.
The principal methodology used in these ratings was "Moody's Approach
to Rating TRUP CDOs" published in May 2011. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
Moody's did not rely on explicit cash modeling or perform any sensitivity
analyses, because today's actions result primarily from consideration
of rapid deleveraging in the transactions, and the ratings of affected
transactions remain under review for possible upgrades.
Moody's notes that the affected transactions are still subject to a high
level of macroeconomic uncertainty although our Moody's outlook
on the banking sector has changed to stable from negative. The
pace of FDIC bank failures continues to decline in 2013 compared to the
last four years, and some of the previously deferring banks have
resumed interest payment on their TruPS.
Further information on Moody's analysis of these transactions are available
on www.moodys.com.
REGULATORY DISCLOSURES
Moody's did not receive or take into account any third party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of these transactions in the past
six months.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
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rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
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have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rachid Ouzidane
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Jian Hu
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's upgrades and places on review for upgrade the ratings of 36 tranches in 16 TruPS CDOs due to significant deleveraging
No Related Data.
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