Fitch: U.S. Bank TruPS CDOs Combined Default & Deferral Rate Declined

NEW YORK--(BUSINESS WIRE)-- The number of combined defaults and deferrals for U.S. bank TruPS CDOs decreased to 15.6% at the end of June 2015 from 16.6% at the end of May 2015, according to the latest index results published today by Fitch Ratings.

Approximately 0.3% of this drop is attributed to the removal of the defaulted and deferring collateral of one TruPS CDO that no longer has outstanding ratings from Fitch, with the remainder of the difference due to new cures.

In June, First BanCorp with total exposure of $202 million (0.5% of the decrease of combined defaults and deferrals) across 14 Fitch-rated TruPS CDOs cured after deferring since March 2012. First BanCorp received regulatory approval to bring current the unpaid interest on outstanding TruPS and started repayment of deferred interest. Across the 14 CDOs, Fitch expects approximately $31 million of cumulative deferred interest to be paid. Fitch affirmed the long-term Issuer Default Ratings (IDR) for First BanCorp at 'B-' in November 2015, citing improvements in credit performance, earnings, capital position, and overall risk profile limited by a challenging operating environment for Puerto Rican banks.

Flagstar Bancorp Inc., which has been deferring since January 2012, received regulatory approval to repay $31 million of deferred interest on outstanding TruPS and simultaneously redeem $267 million of its TARP Preferred Stock. The total TruPS exposure is $209.5 million across 18 Fitch-rated TruPS CDOs. The redemptions and cure would be funded with proceeds from the issuance of $250 million 6.125% senior notes due 2021, as well as a $200 million dividend from its subsidiary Flagstar Bank, FSB.

Two banks, across six CDOs represented the remaining $32.5 million of cures in the month June. One defaulted issuer, with $22.5 million notional in one CDO, was sold realizing a recovery of only 0.2%. In total, three performing bank issuers with aggregate original notional of $19.4 million across three CDOs redeemed their TruPS in June.

One bank with total notional of $12 million in two CDOs re-deferred. There were no new defaults or deferrals in June.

Across 73 Fitch-rated Bank and mixed Bank & Insurance TruPS CDOs, 221 defaulted bank issuers remain in the portfolio representing approximately $5 billion of collateral. As of June 2016, 88 issuers are deferring interest payments on $877 million of collateral, which still includes Flagstar Bancorp as a deferring issuer due to the reporting lag. This compares to $1.5 billion of notional deferring at the end of June 2015.

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

Fitch: U.S. Bank TruPS CDOs Combined Default & Deferral Rate Declined

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885343

Applicable Criteria

Surveillance Criteria for Trust Preferred CDOs (pub. 05 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878874

Related Research

Bank TruPS CDOs: Increasing Concentration Moderates Upgrades

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

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160719006620/en/

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

Source: Fitch Ratings

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