Portafogli e Strategie (investimento) Dall'High Yield al Flight to Quality ... (Vol. IV): Cash is King

[Imark]

Un articolo sempre sul tema dei CLO e della (drastica) riduzione dei rating che Moody's si pronone di compiere. Una circostanza che c'è nel file allegato al post precedente, ma avevo dimenticato di rammentare nel mio breve commento: si parla di 100 mld $ in valore equivalente di soli CLOs bonds europei.

Moody's says may cut ratings of $100 bln in CLOs
Wed Mar 4, 2009 2:07pm GMT

LONDON, March 4 (Reuters) - Moody's Investors Service placed 3,600 tranches of U.S. and European collateralised loan obligations (CLOs) totaling $100 billion on review for possible downgrades on Wednesday.

The action included all but the most senior Aaa-rated tranches out of 760 transactions, and the review is likely to lead to downgrades of at least four notches for those rated single-A and below and of two to four notches on average for Aa and junior Aaa tranches, the rating agency said.

Moody's said it had revised certain key assumptions in rating CLOs to include "default rates that are likely to exceed historical averages and ... heightened interdependence of credit markets in the current global economic contraction".

A CLO is a pool of leveraged loans sliced up by degrees of risk. The riskiest piece -- the equity tranche -- takes the first few percent of default losses from any loan in the portfolio. After it is wiped out, losses move to the next tranche, and so on up the structure to the senior triple-A tranches at the top.

Some senior Aaa tranches still may suffer negative rating actions as Moody's conducts its review, the agency said, even though the top tranche of a typical CLO has enough protection to survive defaults amounting to 50 percent with a recovery rate at 40 percent.

The agency's current forecasting model projects a five-year cumulative default rate for all speculative-grade companies at 30 to 36 percent.

Wednesday's announcement followed Moody's statement last month that it had raised its default probability assumptions for underlying corporate names in CLO portfolios by 30 percent across all rating categories.

It also said it would treat those assets that it had on negative outlooks or on review for possible downgrades as if they had already been downgraded by one or two notches and that it would increase its estimate of correlation of the names in most portfolios.

Moody's said the review would start immediately by using parameters to calibrate the extent of downgrades of tranches rated single-A and below.

"Our sample testing shows that an overwhelming majority of tranches rated single-A or below are expected to experience at least a four-notch downgrade on average, which in the case of the single-As would put them on the boundary between investment grade and speculative grade," it said in the statement.

At the end of March, Moody's plans to start a more comprehensive analysis by modelling each CLO individually and taking actions on Aa and Aaa tranches, because "the unique portfolio characteristics and structural features of the CLOs tend to differentiate performance more at the top end of the capital structure".

The agency said this part of the review is likely to lead to downgrades of two to four notches on average on junior Aaa and Aa tranches as well as downgrades of a small number of senior Aaa tranches.

It expected to finish the second stage of the review by the end of the second quarter.

 

[Imark]

Le operazioni di riduzione del debito attraverso proposte di riacquisto al di sotto della pari sono sempre qualificabili come un distressed debt exchange, portando con sé l'abbattimento del rating a livelli infimi ?

Evidentemente non sempre, in quanto, se chi le fa dispone di buona liquidità e coglie l'opportunità di un basso valore del debito per fare un buon affare con i suoi creditori bancari, magari a propria volta bisognosi di approvvigionarsi di cash, senza che vi sia alcuna esigenza di offrire un riacquisto sotto la pari per evitare un default nel breve termine, allora l'operazione ha una diversa valenza.

Per chi fosse interessato ad approfondire, un breve report sul punto di Fitch...

 

[samantaao]

Le operazioni di riduzione del debito attraverso proposte di riacquisto al di sotto della pari sono sempre qualificabili come un distressed debt exchange, portando con sé l'abbattimento del rating a livelli infimi ?

Evidentemente non sempre, in quanto, se chi le fa dispone di buona liquidità e coglie l'opportunità di un basso valore del debito per fare un buon affare con i suoi creditori bancari, magari a propria volta bisognosi di approvvigionarsi di cash, senza che vi sia alcuna esigenza di offrire un riacquisto sotto la pari per evitare un default nel breve termine, allora l'operazione ha una diversa valenza.

Per chi fosse interessato ad approfondire, un breve report sul punto di Fitch...

interessante, avere un elenco di tali società potrebbe dare buoni spunti

mi sembra che si parli della telefonica TDC che hai a monitor nell'apposito 3d... e alla luce di questo mi sembra che non sia particolarmente cara
(ricordo anche qualche intervento positivo sulla società)

 

[Imark]

interessante, avere un elenco di tali società potrebbe dare buoni spunti

mi sembra che si parli della telefonica TDC che hai a monitor nell'apposito 3d... e alla luce di questo mi sembra che non sia particolarmente cara
(ricordo anche qualche intervento positivo sulla società)

Si, la condotta di TDC viene menzionata come esempio di buon affare, in specie perché l'annullamento instantaneo del debito genera un gain soggetto a imposizione... il che sottolinea la "commercialità" dell'acquisto del debito e la sua massima lontanza rispetto all'ipotesi di acquisto sotto la pari "necessitato" dall'esigenza di evitare un default....

TDC non è particolarmente cara ma è HY...

 

[Imark]

Moody's enfatizza come anche le società USA IG dovranno quantomeno sostenere costi ancora elevati per il rifinanziamento delle scadenze sul debito nel triennio a venire, durante il quale verrano a maturazione 300 mld USD di debito obbligazionario IG, del quale circa un terzo sui gradini più bassi dell'investment grade.

A questi si aggiungono i già rammentati 190 mld di bond HY in scadenza negli USA nello stesso periodo.

[FONT=verdana,arial,helvetica]Moody's: Investment-Grade Refunding Risk Elevated in Tight Credit Market[/FONT]

[FONT=verdana,arial,helvetica]New York, March 16, 2009 -- Refunding risk for the $300 billion of investment-grade non-financial corporate bonds that will mature during the next three years is elevated at a time of tight credit markets and weak economic conditions, according to a new study from Moody's Investors Service. [/FONT]

[FONT=verdana,arial,helvetica]The study of 330 investment-grade non-financial corporate issuers in the U.S. with debt maturing between 2009 and 2011 indicates that credit ratings have migrated downward during the last year. About $100 billion of the $300 billion of maturing debt is rated Baa2 or Baa3, the lowest investment-grade ratings. Of the $10 billion of Baa3-rated bonds maturing in 2009, 28% have either a negative outlook or are under review for a possible ratings downgrade. [/FONT]

[FONT=verdana,arial,helvetica]"Investment-grade companies have comparatively strong credit profiles, with more than half of the bonds maturing over the next three years rated single-A or higher," said Kevin Cassidy, VP-Senior Credit Officer at Moody's. "Still, the overall deterioration of ratings over the last year increases the refinancing risk." [/FONT]

[FONT=verdana,arial,helvetica]The broad financial crisis is elevating refunding risk for most companies. However, many investment-grade issuers are benefiting from investors' relative confidence in companies with higher credit quality, reduced appetite for other forms of investment and need to continue deploying capital. This is reflected in a more than 150% increase in investment-grade non-financial corporate bond issuance during the first two months of 2009 versus the same period in 2008. [/FONT]

[FONT=verdana,arial,helvetica]"Investment-grade issuers have an advantage in these tight credit markets. But considering current conditions, we still consider refunding risk as relatively high for the $99 billion of maturities in 2009," Cassidy said. [/FONT]

[FONT=verdana,arial,helvetica]The global recession is also taking a toll on many investment-grade companies, causing profitability and operating cash flow to deteriorate. This may result in an increase in covenant violations, Cassidy said. [/FONT]

[FONT=verdana,arial,helvetica]"In contrast with the trend for many speculative-grade issuers, we believe that most investment-grade companies should be able to amend their credit facilities, although the cost may be substantial," the analyst noted. [/FONT]

[FONT=verdana,arial,helvetica]Moody's study is its first to examine the refunding risk and needs of investment-grade issuers. The study includes a listing of all debt maturities and putable obligations for U.S. non-financial companies during the next three years -- our latest effort to facilitate greater transparency in intrinsic liquidity analysis at a time of challenging credit market conditions that can constrain access to financing for even investment-grade issuers. [/FONT]

[FONT=verdana,arial,helvetica]Moody's recently published the 11th annual edition of its study for speculative-grade companies. That study found $190 billion of U.S. speculative-grade corporate debt obligations maturing during the same 2009-2011 period[/FONT]

 

[Imark]

Primo serie di rating actions (fra downgrades e riduzioni di outlook) dei rating su 432 CLO bonds... restano in creditwatch per ulteriori azioni in una fase due che avrà luogo nel Q2/2009...

[FONT=verdana,arial,helvetica]Moody's takes rating action on 432 notes issued by 144 CLO transactions[/FONT]

[FONT=verdana,arial,helvetica]New York, March 17, 2009 -- Moody's Investors Service announced today that it has taken rating action on 432 notes from certain U.S. cash-flow collateralized loan obligations (CLOs) issued primarily in 2006. [/FONT]

[FONT=verdana,arial,helvetica]According to Moody's, the rating actions taken on the notes are a result of applying the revised assumptions as described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." These revised assumptions include a 30% stress to the underlying portfolio default probability, the modified treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and a change in the calculation of the Diversity Score. The actions also reflect a general consideration of the credit deterioration in the underlying portfolios. [/FONT]

[FONT=verdana,arial,helvetica]In a press release published on March 4 and titled "Moody's puts all but senior-most tranches on review for downgrade," Moody's announced that it would undertake CLO rating reviews in two stages. Today's actions are a result of our Stage I analysis that is largely based on the examination of certain CLO portfolio and tranche parameters, including, but not limited to (1) the current tranche rating, (2) the level of over-collateralization (O/C), (3) the Weighted Average Rating Factor (WARF) transition since mid-2008, (4) the absolute increase in the percentage of Caa-rated assets since mid-2008, (5) whether a tranche is currently, or is expected on an upcoming payment date, to pay-in-kind (PIK), and (6) the concentration of structured finance securities, such as other CLOs, in the collateral pool. In addition to these parameters, which serve as guidelines for rating committees, Moody's is also individually assessing each transaction by taking into account additional deal performance information and certain qualitative factors such as deal-specific document features and structural protections. [/FONT]

[FONT=verdana,arial,helvetica]Moody's notes that the ratings of all CLO tranches affected by today's actions remain on review for possible downgrade. Moody's will continue to review these transactions with additional detailed deal analysis in Stage II -- which will commence in the second quarter of 2009. During Stage II, ratings on all CLO tranches may be subject to additional rating actions as necessary. [/FONT]

[FONT=verdana,arial,helvetica]The principal methodology used in rating and monitoring the transactions is the following publication, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory: [/FONT]

[FONT=verdana,arial,helvetica]Moody's Approach to Rating Collateralized Loan Obligations (December 31, 2008). [/FONT]

[FONT=verdana,arial,helvetica]Other methodologies and factors that may have been considered in the rating process can also be found in the Credit Policy & Methodologies directory. [/FONT]

[FONT=verdana,arial,helvetica]A list of the actions associated with this announcement may be found at: [/FONT]

[FONT=verdana,arial,helvetica](Excel data) [/FONT]

[FONT=verdana,arial,helvetica]http://www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBS_SF159935 [/FONT]

 

[Imark]

Una notizia importante sulla composizione dell'ITRAXX Crossover dei CDS degli emittenti HY di fascia alta, IG di fascia marginale, nel passaggio dalla serie 10 alla 11. L'indice esprime il costo della copertura del rischio emittente via CDS rispetto ad un paniere di debitori corporate europei, per la gran parte HY o appunto ai margini dell'IG.

Il breve commento di Jyske bank nel riportare la nuova composizione dell'indice.

iTraxx Xover rolls over today

Today, iTraxx Xover series 10 rolls into series 11. In the new series, the number of companies included in the index is cut from 50 to 45.​

In order to qualify for the index, the company’s five-year CDS must comply with the following criteria: 1) must trade less than 50% upfront plus 500 bp running spread (raised from 25% upfront at the latest index roll) and 2) must have an average spread at least twice the average spread of the iTraxx Non-Financial index calculated as an average over the last 10 trading days preceding the index roll.​

Ineos, Infineon, Basell, Ono and Truvo are exiting the new index as their CDS spreads are too wide, while Cable & Wireless, Colt Telecom, Fresenius, Havas, Ladbrokes and Kingfisher exit because their spreads are too narrow.​

Ciba has been removed because the company is being acquired by BASF, an investment grade company. In addition, SOL Melia and Rank have been removed because they no longer have publicly traded debt in excess of EUR 100 million. New names in the index are Clariant, Fiat, GKN, Lafarge, Peugeot, Porsche, Renault, Rentokil and Valeo.​

Six of the new names are from the automotive industry, and the index will therefore comprise a total of seven names from the auto industry.​

Generally, the composition of the index is therefore very different from series 10 as many high-risk names have been removed.​

The iTraxx Xover Series 10 opened at 1,115 bp yesterday and traded evenly across the day, clos-ing at the 1,110 bp level.

 

[Imark]

Ed un commento più ampio e significativo del WSJ online di oggi...

MARCH 20, 2009, 5:23 A.M. ET

UPDATE: iTraxx Indexes Roll Into Series 11,Tighter Vs Series10

(Adds background, detail.)

LONDON (Dow Jones)--Series 11 Markit iTraxx credit default swap indexes are quoted significantly tighter than the series 10 indexes, after the roll into the new series at 0800 GMT Friday.

The iTraxx Crossover index, which tracks the cost of protection on a basket of mostly sub investment grade European corporate borrowers, was quoted around at 920 basis points, according to credit strategists, roughly 200 basis points tighter than Series 10.

Similarly, the iTraxx Europe index, which tracks the cost of insuring a basket of 125 investment grade names against default, was quoted at 167.5 basis points, around 20 basis points tighter than Series 10.

The HiVol index, which measures the cost of insuring debt issued by the 30 non-financial companies in the Europe index with the widest CDS spreads, was quoted at 370 basis points, around 20 basis points tighter than series 10.

In the twice-yearly iTraxx index roll, borrowers enter or leave the indexes according to their CDS spreads, liquidity and credit ratings. The index maturities are also extended by six months.

The difference in spreads between the new and the old index is significantly bigger than in previous rolls. The tighter spreads on Series 11 reflect the removal of borrowers which have been downgraded or whose CDS spreads have widened beyond the maximum level for index membership.

This was widely expected, although one strategist said that new Crossover index was trading even tighter than anticipated, after the final list of constituents was released late Thursday.

The Crossover index has been reduced from 50 companies to 45, to make sure that only borrowers with sufficiently liquid CDS are included.

Eleven constituents were replaced in the iTraxx Europe index, fourteen constituents removed and nine added to the Crossover index, and eighteen constituents replaced in the HiVol index.

Another reason that spreads on the new indexes are tighter is that CDS curves are inverted, meaning investors have become so anxious about the near-term risk of defaults that it costs more to buy shorter-dated default insurance than a longer-term contract.

CDS are tradable, over-the-counter derivatives that function like a default insurance contract for corporate debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller.

The series 10 Europe, Crossover, and HiVol indexes closed at 184 basis points, 1,104 basis points, and 390 basis points respectively Thursday.

The index will continue to trade alongside the new series. Series 10 spreads have seen unprecedented widening since they started trading last September, as the financial crisis and global economic downturn have started pushing corporate default rates up.

 

[Imark]

Un'altra notizia che volevo segnalarvi e che è sintomatica di come la ripresa del settore immobiliare USA tarderà ad arrivare (le stime formulate nel pre-Lehman, per una ripresa in tarda primavera 2009, andranno probabilmente riviste in chiave peggiorativa) riguarda la messa sotto osservazione con implicazioni negative del rating di 173 mld $ di RMBS (residential mortgage backed securities) aventi come collaterale i cd. jumbo loans da parte di Moody's.

Si tratta mutui residenziali "prime" (ossia di qualità elevata) che, eccedendo la soglia quantitativa fissata per le agenzie Fannie Mae e Freddie Mac a 417.000 $, non potevano essere da queste acquistati o cartolarizzati.

Sono peraltro i mutui accordati per chi acquista abitazioni di qualità alta o medio alta in molte zone degli USA.

Negli ultimi 6 mesi c'è stata una crescita dei livelli di tardività o problematicità nel fare fronte al pagamento delle rate da parte dei debitori senza precedenti per questa tipologia di mutui, il che induce Moody's a rivedere al rialzo le stime di insolvenza, ma anche, in forza di previsioni per un ulteriore calo dei prezzi delle case USA dell'11%, ad innalzare al 40% la stima media di perdite sui default sui jumbo loans.

Altre importanti info di dettagli nel pezzo del WSJ online, ripreso dal DJ Newswire.

MARCH 19, 2009, 6:36 A.M. ET

Moody's Puts $173.3B Of Jumbo RMBS On Watch For Downgrade


DOW JONES NEWSWIRES

Moody's Investors Service said it has put $173.3 billion of U.S. jumbo residential mortgage-backed securities from the past four years on watch for possible downgrade as it boosted its projections for losses from the segment.

The RMBS are from 4,988 tranches issued from 2005 to 2008, and had an original balance of $240.7 billion.

Jumbo loans are typically considered to be of prime credit quality, but don't meet guidelines set by mortgage financiers Fannie Mae (FNM) and Freddie Mac (FRE) because of their size. The minimum amount borrowed under such loans is $417,000.

Moody's noted that during the last six months, jumbo mortgages from those years have shown "substantial increases in serious delinquencies" and drops in prepayment rates - levels it said are unprecedented for the asset class. That, along with concerns about the continuing nationwide housing-price drop and rising unemployment rate, prompted the ratings agency to boost loss projections.

They now range from 1.7% for 2005 to 6.2% for last year's securitizations. The estimates for 2006 and 2007 were roughly doubled to 3.6% and 5.1%, respectively.

Moody's also estimated the eventual default rates for borrowers who become seriously delinquent by the end of this year will be from 2.3% for 2005 loans to 6.2% for 2008. For the more-recent loans, those rates would be nearly double current levels.

Because the ratings agency expects a further 11% drop in home prices, it assumes average losses on defaulting jumbo mortgages will be about 40%.

Taken together, Moody's expects 70% of 2005 senior securities to maintain investment-grade ratings.

For the next year, some one-third may find themselves in highly speculative territory, with few senior securities from 2007 finding themselves with non-junk ratings. Most are expected to be in the C-range.

 

[stockuccio]

non erano 241 ? http://www.reuters.com/article/bondsNews/idUSN1940364820090319