Fitch: Rate of U.S. Bank TruPS CDO Upgrades to Slow

CHICAGO--(BUSINESS WIRE)-- Slowing bank collateral redemptions and no apparent impetus for redemptions to accelerate is likely to temper the rate of future upgrades for U.S. bank TruPS CDOs, according to Fitch Ratings in a new report.

Cost of capital, in contrast to the changes in the regulatory treatment of TruPS in more recent years, will be at the forefront of issuers' decision to redeem early. While almost half of the issuers deferring at the end of 2Q'13 have cured, re-deferrals have picked up most recently. In addition, many re-deferrals took place shortly after issuers cured, which may suggest that some of the re-performing banks have not fully recovered and may need additional time to strengthen their capital base.

Additionally, a relative contribution from excess spread to CDO notes amortization diminished compared to 2014. This trend is expected to continue as more coverage tests come to compliance. Increasing portfolio concentration and expected slowdown in redemptions will temper future bank TruPS CDO upgrades, especially at an investment grade level.

Fitch's report highlights trends and key rating drivers for TruPS CDOs since its performance report from 2013 (highlighted below at the end of the press release). 'Bank TruPS CDOs: Increasing Concentration Moderates Upgrades' is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Bank TruPS CDOs: Increasing Concentration Moderates Upgrades' (Oct. 22, 2015);

--'Bank TruPS CDO Index' (July 29, 2015);

--'Fitch: U.S. Bank TruPS CDOs Combined Default & Deferral Rate Remained Low' (September 22, 2015);

--'Bank TruPS CDOs: Stabilization Trends Lead to Upgrades' (Oct. 10, 2013).

Bank TruPS CDOs: Increasing Concentration Moderates Upgrades

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872566

Applicable Criteria

Surveillance Criteria for Trust Preferred CDOs (pub. 10 Jul 2013)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=712403

Related Research

Bank TruPS CDO Index -- 2Q15

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868893

Bank TruPS CDOs: Stabilization Trends Lead to Upgrades

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720168

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151029006528/en/

Fitch Ratings, Inc.
Alina Pak, CFA
Senior Director
+1-312-368-3184
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Azadeh Sharif
Associate Director
+1-212-908-0874
or
Todor Sapundzhiev
Associate Analyst
+1-312-368-3198
or
Media Relations
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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