Derivative Fitch Affirms Dekania CDO II, Ltd./Inc.
Derivative Fitch affirms seven classes of notes issued by Dekania CDO II, Ltd. (Dekania II). These affirmations are the result of Derivative Fitch's review process and are effective immediately:
-- $200,000,000 class A-1 notes at 'AAA';
-- $42,000,000 class A-2 notes at 'AAA';
-- $60,000,000 class B notes at 'AA';
-- $21,200,000 class C-1 notes at 'A-';
-- $30,000,000 class C-2 notes at 'A-';
-- $14,232,987 class D-1 notes at 'BBB';
-- $4,744,329 class D-2 notes at 'BBB'.
Dekania II is a collateralized debt obligation (CDO), which closed April 29, 2004. Dekania II is a static pool composed of insurance trust preferred securities, senior notes, subordinated debt, and surplus notes. Included in this review, Derivative Fitch performed an analysis of the collateral included in the portfolio.
Currently, one security with a notional balance of $15 million is deferring interest payments. However, the weighted average insurance score of the assets have remained relatively stable. To date, a total of approximately $1.02 million of the class D notes has been redeemed through reverse turbo feature that traps excess spread after the preferred shares have received a dividend yield of 20%. According to the Aug. 30, 2006, trustee report, the class A/B overcollateralization (OC) ratio has been reduced to 127.73%, but continues to pass its performance test trigger of 117.0%. The class C and D OC tests are currently at 109.2% and 103.6% respectively and continue to pass their performance test triggers of 106.5% and 103.5% respectively.
The ratings of the class A-1, A-2, and B notes address the likelihood that investors will receive timely payments of interest as well as the ultimate payment of principal by the stated maturity date. The ratings on the class C-1, C-2, D-1 and D-2 notes address the likelihood that investors will receive ultimate interest and deferred interest payments as well as the ultimate payment of principal by the stated maturity date.
As a result of this analysis, Derivative Fitch has determined that the current ratings assigned to the senior and mezzanine notes still reflect the current risk to noteholders. Derivative Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Derivative Fitch web site at www.derivativefitch.com. For more information on Fitch's approach to rating CDOs of trust preferred securities, see the special report, 'Rating Criteria for US Bank and Insurance Trust Preferred CDOs' dated Feb. 2, 2005 and available on Fitch's web site.
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 are also available from the 'Code of Conduct' section of this site.
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