Fitch Ratings has downgraded one class and affirmed two classes of notes issued by PPM America High Yield CBO I (PPM HY CBO I). A detailed list of rating actions follows at the end of this press release.
This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria', 'Global Rating Criteria for Corporate CDOs', 'Global Surveillance Criteria for Corporate CDOs', 'Criteria for Structured Finance Recovery Ratings' and 'Rating Market Value Structures'.
The downgrade of the class A-1 notes is due to the insufficient collateral available to redeem the notes at maturity. Currently, the notional balance of the class A-1 notes is approximately $39.2 million, compared to a total collateral balance of only $19.9 million. Based on Fitch's expectation of future interest and principal cash flows, the recovery rating is also revised downward.
Due to insufficient interest proceeds, the class A-3 notes received only partial interest at the latest payment date in December 2009. Fitch expects these notes to continue to receive only partial interest payments in the future and no principal recovery. The class B notes are not expected to receive any future distributions.
Recovery Ratings are based on the total discounted future cash flows projected to be available to each class of notes in a base-case default scenario. Fitch considered the projected market value risk of long dated assets in addition to expected losses on the performing portfolio when determining ultimate recovery expectations for the notes. Recovery Ratings are designed to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities. Distressed securities are defined as bonds that face a real possibility of default at or prior to maturity and by definition are rated 'CCC' or below. For further detail on Recovery Ratings, please see Fitch's report 'Global Surveillance Criteria for Corporate CDOs'.
PPM HY CBO I is a cash flow collateralized debt obligation (CDO) that closed on March 2, 1999 and is managed by PPM America, Inc. PPM HY CBO I exited its reinvestment period in June 2003 and currently has a portfolio consisting of six high yield bonds.
Fitch has downgraded and revised the Recovery Rating (RR) for the following class:
--$39,252,672 class A-1 notes downgraded to 'C/RR4' from 'CC/RR3';
Fitch has affirmed the following classes:
--$55,700,000 class A-3 notes at 'C/RR6;
--$73,100,000 class B notes at 'C/RR6'.
These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:
--'Global Structured Finance Rating Criteria' (Sept. 30, 2009);
--'Global Rating Criteria for Corporate CDOs' (April 30, 2008);
--'Global Surveillance Criteria for Corporate CDOs' (Dec. 7, 2009);
--'Rating Market Value Structures' (April 18, 2008);
--'Criteria for Structured Finance Recovery Ratings' (Aug. 17, 2009).
Fitch will continue to monitor and review this transaction for future rating adjustments.
Additional transaction information and historical data are also available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
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Contacts:
Fitch Ratings, New York
Elizabeth Nugent, 212-908-9157
Kevin
Kendra, 212-908-0760
or
Media Relations:
Sandro Scenga,
212-908-0278
Email: sandro.scenga@fitchratings.com