S&P Lowers Rating on ML CBO IV 1996-PM-1 Class A Notes: OffWatch

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S&P Lowers Rating on ML CBO IV 1996-PM-1 Class A Notes: OffWatch
   NEW YORK, Feb. 4 /PRNewswire/ -- Standard & Poor's today lowered its rating
on the class A notes issued by ML CBO IV Series 1996-PM-1 Ltd., an arbitrage
CBO transaction originated in 1996, to triple-'B' from double-'A'-minus, and
removed it from CreditWatch with negative implications, where it was placed on
Feb. 23, 2001.
    The lowered rating reflects factors that have negatively affected the
credit enhancement available to support the rated notes. These factors include
a downward migration in the credit quality of the performing assets within the
collateral pool and par erosion of the collateral pool securing the rated
notes.
    Standard & Poor's noted that the credit quality of the performing assets
within the collateral pool has deteriorated during recent months. Currently,
$74.9 million (or approximately 15.8%) of the performing assets within the
collateral pool come from obligors with ratings that are on CreditWatch with
negative implications, and $87.43 million (or approximately 12.94%) come from
obligors with ratings in the triple-'C' range. Standard & Poor's default
measure, the expected portfolio default rate (EPDR), which measures the level
of cumulative future defaults expected from the portfolio based on the rating,
tenor, and par value of each performing asset, was 12.95%.
    Standard & Poor's also noted that a total of $200.89 million (or
approximately 29.8%) of the assets in the collateral pool come from obligors
currently rated 'D' or 'SD' by Standard & Poor's, with $47.14 of these
defaults having occurred after the close of the most recent available (Dec.
10, 2001) monthly report and not yet reflected in the transaction's
overcollateralization ratios, along with another $58.91 million of additional
defaulted assets. According to the Dec. 10, 2001 monthly report, the class A
overcollateralization ratio was 116.20%, versus its minimum required ratio of
110.0%. An overcollateralization ratio test for a subordinate tranche not
rated by Standard & Poor's, the class B overcollateralization test, was
failing, with a ratio of 104.31% versus its minimum required ratio of 105.10%.
    Standard & Poor's has reviewed current cash flow runs generated for ML
CBO IV 1996-PM-1 to determine the level of future defaults the transaction can
withstand under various stressed default timing and interest rate scenarios
while still paying all of the rated interest and principal due on the class A
notes. After comparing the results of these cash flow runs with the projected
default performance of the current collateral pool, Standard & Poor's
determined that the double-'A'-minus rating previously assigned to the class A
notes was no longer consistent with the credit enhancement available to
support the notes, resulting in the lowered rating. Standard & Poor's will
continue to monitor the future performance of the transaction to ensure that
the ratings assigned to the class A notes remains consistent with the credit
enhancement available.

    RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE

    ML CBO IV Series 1996-PM-1

                 Rating
    Class     To         From             Current Balance
    A         BBB        AA-/Watch Neg    $555.00 million
SOURCE Standard & Poor's
http://www.standardandpoors.com/ratings
CONTACT:
Patrick Coyne, New York, +1-212-438-2435, or
Stephen Anderberg, New York, +1- 212-438-8991, both for Standard
& Poor's