CHICAGO--(BUSINESS WIRE)--Fitch Ratings today published an updated rating criteria report for Trust Preferred collateralized debt obligations (TruPS CDOs). This report updates and replaces the prior criteria report titled Surveillance Criteria for Trust Preferred CDOs' dated July 10, 2013.
This criteria update incorporates the length of a deferral in Fitch's assessment of the likelihood of its cure. Fitch assumes a higher likelihood of cure for a 'strong' deferral than for a 'weak' deferral. The 'strong' vs. 'weak' designation was previously based on the recent bank score history, with a bank score assigned based on Fitch's proprietary model utilized to assess credit quality of a non-rated bank issuer.
The updated criteria will consider a deferral past its five year mark (the maximum allowable deferral length) to be 'weak', regardless of its score history.
Based on the data at the end of March, $31 million in notional value will be reclassified from a 'strong' to a 'weak' deferral. An additional $502 million notional of deferring TruPS will surpass their respective five year mark in 2014, absent future cures. 21.6% of this amount, or $103 million, is currently considered 'strong' deferrals. Given the total deferral notional amount of $2,615 million, the impact of this reclassification is minimal, as further confirmed by Fitch's testing of the most exposed TruPS CDOs.
Accordingly, Fitch does not expect this change to have any material impact on its ratings of TruPS CDOs. The update does not contain any other changes to the key assumptions for Fitch's analysis of TruPS CDOs.
The criteria report 'US Surveillance Criteria for Trust Preferred CDOs' is available on the Fitch Ratings website at 'www.fitchratings.com' under the sectors:
Sectors >> Structured Finance >> Structured Credit >> Research
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Surveillance Criteria for Trust Preferred CDOs