NEW YORK, Feb. 8 /PRNewswire/ -- Standard & Poor's today lowered its
ratings on the class A-2 and A-3 notes issued by ML CLO XV Pilgrim America
(Cayman) Ltd., an arbitrage CLO transaction originated in 1998, to
double-'A'-minus from double-'A', and removed them from CreditWatch with
negative implications, where they were placed on Oct. 24, 2000. At the same
time, the triple-'A' rating on the class A-1 notes from the same issuer is
affirmed based on the very high level of overcollateralization available to
support the class A-1 tranche (see list).
The lowered ratings on the class A-2 and A-3 notes reflect factors that
have negatively affected the credit enhancement available to support the rated
notes. These factors include a par erosion of the collateral pool securing
the rated notes, and a downward migration in the credit quality of the
performing assets within the collateral pool.
Standard & Poor's noted that a total of $44.154 million (or approximately
12.37%) of the assets in the collateral pool come from obligors currently
rated 'D' by Standard & Poor's, and another $4.5 million (or approximately
1.26%) of the assets in the pool come from obligors rated double-'C', which
are highly vulnerable to default. As a result of asset defaults, the
overcollateralization ratios for the transaction have declined. According to
the Dec. 24, 2001 monthly report, the class A-2 and A-3 overcollateralization
ratio was 110.85%, versus its minimum required ratio of 117.0%.
The credit quality of the performing assets within the collateral pool has
also deteriorated somewhat. Currently, $24.148 million (or approximately 9.0%)
of the performing assets within the collateral pool come from obligors with
ratings on CreditWatch with negative implications, and $18.146 million (or
approximately 5.08%) of the performing assets 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 15.4%.
Standard & Poor's has reviewed current cash flow runs generated for ML CLO
XV 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 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 ratings previously assigned to the class A-2 and A-3
notes were no longer consistent with the credit enhancement available to
support these tranches, resulting in the lowered ratings. At the same time,
triple-'A' rating assigned to the class A-1 notes is affirmed based on the
very high level of overcollateralization available to support the class A-1
notes. Standard & Poor's will continue to monitor the future performance of
the transaction to ensure that the ratings assigned remain consistent with the
credit enhancement available.
RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE
ML CLO XV Pilgrim America (Cayman) Ltd.
Rating
Class To From Current Balance
A-2 AA- AA/Watch Neg $68.00 million
A-3 AA- AA/Watch Neg $207.0 million
RATING AFFIRMED
ML CLO XV Pilgrim America (Cayman) Ltd.
Class Rating Current Balance Original Balance
A-1 AAA $28.136 million $52.00 million
SOURCE Standard & Poor's
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Related links:
http://www.standardandpoors.com/ratings
CONTACT:
Patrick Coyne, +1-212-438-2435, or Stephen
Anderberg, +1-212-438-8991, both of Standard & Poor's
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