NEW YORK, Feb. 6 /PRNewswire/ -- Standard & Poor's today placed its
ratings on the class A-2, B, and C notes issued by Equus Capital Funding Ltd.,
an arbitrage CBO transaction, on CreditWatch with negative implications. At
the same time, the triple-'A' rating on the class A-1 notes is affirmed based
on a financial guarantee insurance policy issued by MBIA Insurance Corp. (see
list).
The CreditWatch placements on the ratings assigned to the class A-2, B,
and C notes reflect factors that have negatively affected the credit
enhancement available to support the rated notes since the transaction was
originated in June of 2000. These factors include par erosion of the
collateral pool securing the rated notes, deterioration in the credit quality
of the performing assets within the pool, and a decline in the weighted
average coupon generated by the performing assets.
Standard & Poor's notes that $29.03 million (or approximately 12.51%) of
the assets currently in the collateral pool come from obligors rated 'D' or
'SD' by Standard & Poor's, with $17 million of these defaults having occurred
after the close of the Dec. 31, 2001 monthly report. As a result of asset
defaults and credit risk sales at distressed prices, the overcollateralization
ratios for the transaction have deteriorated since the transaction was
originated. As of the Dec. 31, 2001 monthly report, two of the transaction's
three overcollateralization ratio tests are failing: the class A
overcollateralization ratio test, with a current ratio of 125.11% versus the
minimum required 128% and an effective date ratio of approximately 135%, and
the class B overcollateralization ratio test, with a current ratio of 114.08%
versus the minimum required 118.75% and an effective date ratio of
approximately 123%. The class C overcollateralization ratio test, at 110.64%
versus its required minimum ratio of 102%, is passing.
The credit quality of the collateral pool has also deteriorated since the
transaction was originated. Currently, $40.78 million (or approximately
20.1%) of the performing assets in the collateral pool come from obligors with
ratings on CreditWatch with negative implications, and $18.34 million (or
approximately 7.9%) of the performing assets come from obligors with ratings
in the triple-'C' range.
Finally, the weighted average coupon generated by the performing fixed-
rate assets in the pool has declined since the transaction was originated.
According to the Dec. 31, 2001 monthly report, the weighted average coupon was
at 10.03%, compared to the minimum required weighted average coupon of 10.05%
and an original weighted average coupon of approximately 10.32%.
Standard & Poor's will be reviewing the results of current cash flow runs
generated for Equus Capital Funding Ltd. to determine the level of future
defaults the rated tranches can withstand under various stressed default
timing and interest rate scenarios while still paying all of the interest and
principal due on the notes. The results of these cash flow runs will be
compared with the projected default performance of the performing assets in
the collateral pool to determine whether the ratings assigned to the class
A-2, B, and C notes remain consistent with the credit enhancement available.
RATINGS PLACED ON CREDITWATCH NEGATIVE
Equus Capital Funding Ltd.
Class Rating
To From Balance (mil. $)
A-2 AA/Watch Neg AA 87.909
B BBB/Watch Neg BBB 17
C BB/Watch Neg BB 6
RATING AFFIRMED
Equus Capital Funding Ltd.
Class Rating Balance (mil. $)
A-1 AAA 87.909
SOURCE Standard & Poor's
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Related links:
http://www.standardandpoors.com/ratings
CONTACT:
Stephen Anderberg, +1-212-438-8991, or
Patrick Coyne, +1-212-438-2435, both of Standard & Poor's Ratings
Services, New York
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