US Bank TruPS CDO Defaults Near 14% on Deferral Transfer Spike

Three new bank defaults from previously deferring issuers resulted in another increase on U.S. bank TruPS CDO defaults to 13.7%, according to the latest default and deferral index results from Fitch Ratings.

“Banks that issued between $20 and $75 million of TruPS outstanding in CDOs have been the primary drivers of new default and deferral activity since the beginning of this year.”

Derek Miller

The CDO Cashflow Waterfall

Last month’s new defaults totaled $72.5 million (affecting 10 CDOs). Additionally, 22 banks began deferring interest payments on roughly $302.5 million of collateral in 23 TruPS CDOs, according to Fitch Ratings.

“Second-quarter acquisition activity resulted in two banks curing their deferrals,” says Director Johann Juan.

“The acquiring banks resumed payments in June on the full balance, including accrued interest on the TruPS issued by the acquired entities.”

Amid increased deferrals in June, the pace of new deferrals continues to slow and has for the last three quarters, according to Senior Director Derek Miller.

“Banks that issued between $20 and $75 million of TruPS outstanding in CDOs have been the primary drivers of new default and deferral activity since the beginning of this year,” says Miller.

The three new bank defaults bring the total to 123 (affecting 82 CDOs).

The 362 banks now deferring are affecting interest payments on $6.5 billion of collateral held by 83 TruPS CDOs.

Fitch’s Bank Default and Deferral Index tracks defaults and deferrals by banks and bank holding companies within Fitch’s rated universe of 85 bank TruPS CDOs (encompassing approximately $37.7 billion of bank collateral originated).

The index includes all types of securities issued by banks and bank holding companies such as TruPS and senior and subordinated debt.

Fitch publishes the Index results monthly.

‘Fitch Bank TruPS CDO Default and Deferral Index’ is available by clicking on the link or by going to ‘www.fitchratings.com’ under the following headers:

Sectors >> Structured Finance >> Structured Credit >> Research

Related Research: Fitch Bank TruPS CDO Default and Deferral Index (As of June 2010)

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