Fitch Ratings Affirms Two Classes of Avalon Capital Ltd. 2.Business Editors NEW YORK--(BUSINESS WIRE)--May 14, 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. affirms two classes of notes issued by Avalon Capital Ltd. 2 (Avalon 2). These affirmations are the result of Fitch's annual review process. The following rating actions are effective immediately: -- $513,000,000 Class A Senior Floating Rate Notes 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. at 'AAA'; -- $85,000,000 Class B Subordinated Floating Rate Notes affirmed at 'BBB'. Avalon 2 is a collateralized debt obligation Collateralized Debt Obligation (CDO) A general inclusive term which covers Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations, (CDO (Collaborative Data Objects) A programming interface from Microsoft for accessing MAPI-based e-mail, calendaring and scheduling servers. Originally called "OLE Messaging" and "Active Messaging," CDO wraps the Enhanced MAPI library into a COM object that provides the ) consisting of high yield loans and managed by INVESCO Senior Secured Management, Inc. (INVESCO). Fitch has reviewed in detail the portfolio performance of Avalon 2. In conjunction with this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. Since inception in October 2000, the Avalon 2 portfolio has experienced some deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. . As of the most recent trustee report dated April 30, 2003, the portfolio had 3.97% in defaulted securities and 2.97% in securities rated CCC CCC A very speculative grade assigned to a debt obligation by a rating agency. Such a rating indicates default or considerable doubt that interest will be paid or principal repaid. Also called Caa. + or lower (excluding defaults). The Book Value Ratio declined from 106.2% (as stated in the trustee report) to 104.4% as of April 30, 2003. For the purpose of calculating the Book Value Ratio defaulted assets are included at 50% of par value. If any further deterioration occurs in the portfolio, the deal has structural features that maintain value for the Class A and Class B noteholders through the Book Value Ratio Test. The test diverts excess interest to the Priority Note Reserve Account when the Book Value Ratio falls below 105% on any payment date. The Priority Reserve Account balance is invested in high quality short term securities. Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the original ratings assigned to the class A and B notes still reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch web site at (www.fitchratings.com). |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion