Derivative Fitch: Rating Performance of U.S. Mezzanine TRR CLOs Similar to Cash CLOs.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- U.S. total rate-of-return collateralized loan obligations (TRR TRR Transportation Research Record (Journal) TRR Test Readiness Review TRR Target Ranging Radar TRR Total Rate of Return TRR Taiwan Research Reactor CLOs) that are leveraged via total return swaps (TRS See traffic engineering methods. TRS - term rewriting system ) and similar structures have shown comparable rating performance as similarly rated tranches from traditional cash CLOs, according to a special report by Derivative Fitch. Derivative Fitch has rated 100 public and private TRR CLO CLO See: Collateralized Loan Obligation. mezzanine tranches originally rated 'BBB+', 'BBB' or 'BBB-' since 1996. Issuance of TRR CLOs grew rapidly during 1996-1999 before dropping significantly in 2002 following the higher default rates and general credit crunch Credit Crunch An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. in the non-investment grade corporate debt markets. However, Managing Director Kevin Kendra says that Fitch has seen renewed interest as the credit environment has improved, with Fitch rating 12 new TRR CLOs since 2004. Fitch has downgraded 13 tranches and upgraded three among the 100 public and private mezzanine Fitch-rated TRR CLOs in the last ten years. Overall, approximately 13% of the mezzanine TRR CLO tranches have been downgraded an average of 4.31 notches versus approximately 14% downgraded an average of 4.33 notches for the mezzanine tranches from Fitch-rated cash CLOs. While the downgrade rating performance is comparable, 'The longer reinvestment periods and other structural differences between cash and TRR CLOs explain the difference in upgrade rating histories,' said Kendra. 'Additionally, mezzanine TRR CLO notes combine the traditional debt instrument return profile with an equity-like return through an unrated additional coupon and/or residual payment at termination,' continued Kendra. 'Total Rate-of-Return Collateralized Loan Obligation Rating Performance' is available on the Fitch Ratings web site at www.fitchratings.com. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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