While default and deferral rates for U.S. bank trust preferred security CDOs remain flat, the sector saw a first last month when a tender offer was accepted in connection with a CDO, according to Fitch Ratings.
Fitch said Monday it received notice of the first tender offer to be accepted and completed in connection with a TruPS CDO. The offer, completed in January, affected four CDOs holding the TruPS. Each received roughly 21% of par in exchange for termination of the TruPS.
There have been several requests for noteholder consent from distressed banks to tender their securities over the last year. However, this was the first offer that was successfully completed within TruPS CDOs to date, Fitch director Johann Juan said in a press release.
“It’s still too early to tell if additional tender offers in TruPS CDOs will be accepted and completed in the near future so Fitch is viewing the development as an unique occurrence for now,” Juan said. “Whether a successful tender offer is a benefit or detriment to bank TruPS CDO performance also remains to be seen.”
Overall, default and deferral rates remain relatively flat. Bank TruPS CDO defaults increased marginally by 0.03% to 15.15% last month, while deferrals remained at 17.97%.
Subsequently, the combined default and deferral rate for banks within TruPS CDOs increased slightly from 33.09% to 33.12%.
At the end of last month, 164 bank issuers were in default, representing about $5.71 billion held across 79 TruPS CDOs, while 387 deferring bank issuers were affecting interest payments on $6.77 billion of collateral held by 84 TruPS CDOs.
