Fitch Ratings Affirms Pilgrim America CBO I Ltd.Business Editors CHICAGO--(BUSINESS WIRE)--Dec. 17, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the ratings of three classes of notes issued by Pilgrim America CBO CBO See: Collateralized Bond Obligation. I Ltd. (Pilgrim CBO), a collateralized bond obligation Collateralized Bond Obligation (CBO) Investment-grade bonds backed by a collection of junk bonds with different levels of risk, called tiers, that are determined by the quality of junk bond involved. (CBO) backed by high yield bonds. The following classes have been affirmed: -- $101,061,894 class A notes 'BBB-'; -- $41,000,000 class B notes 'C'; -- $41,000,000 class C notes 'C'. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. its November 2003 trustee report, the Pilgrim CBO portfolio collateral includes a par amount of $31.05 million (20.8%) of defaulted assets. The deal also contains 22.2% of assets rated 'CCC-' or below, excluding defaults. The class A and class B overcollateralization (OC) tests are failing at 129.65% and 92.23%, versus their triggers of 135% and 118%, respectively. The total OC test is also failing at 71.57% versus a trigger of 107%. The reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. period has ended causing principal payments from collateral to amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. the class A notes. Fitch believes this provides the appropriate protection for the class A notes to maintain their rating. As a result of failure of the class A OC test, the class B notes have not received current interest on several recent payment dates causing them to capitalize nearly $10.9 million. Fitch expects a total recovery on the class B notes between 40%-85%. As a result of failures to both the class A and class B OC tests, the class C notes have capitalized $20.2 million of unpaid interest. Fitch expects a total recovery on the class C notes below 40%. In determining this rating action, a credit committee reviewed the results of cash flow model runs, incorporating several different default and interest rate stress scenarios. Also, Fitch discussed with Prudential Securities, Inc., the portfolio manager, their expectations and opinions of the portfolio. Deal information and historical data on Pilgrim America CBO I Ltd. is available on the Fitch Ratings web site at 'www.fitchratings.com'. |
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