Brazil's MSF Funding continues to perform well, untroubled by the bankruptcy that has hobbled the originator's parent, DVI. Last week, Standard & Poor's removed the ratings of four tranches from creditwatch negative. Class A notes, with a meager $1.53 million outstanding, were affirmed at A'. The subordination on the senior piece is currently 84%. Including an equity piece, the total size of the deal is $9.81 million.
Fitch Ratings, meanwhile, has kept the notes on negative watch, with the A tranche at BBB'. Still, "the deal's been performing consistently considering it's accelerated," said Jennifer Connor, an analyst at the agency. Moody's Investors Service confirmed the rating on all the notes in March, with the A' tranche at Baa2'.
At the current amortization rate, the A piece is expected to pay down in two months, the following two tranches next year, and the fourth tranche in the waterfall - the D notes - in January 2006.
As of the Sept. 27 payment date, only 2.6% of the equipment lease portfolio backing the deal had defaulted, according to S&P. Of the remaining leases, 6% were delinquent.
The exclusion of the Medical Systems Finance (MSF) companies from the bankruptcy proceedings of DVI have enabled the originator to weather the parent company's distress with hardly a scratch. MSF has remained the servicer on the deal throughout the crisis, dispelling concern early on that backup servicer JPMorgan Chase would have to step in and would be less adept than MSF. In addition, should a servicing event take place, JPMorganChase has agreed to subcontract servicing responsibilities to Banco Bradesco, the largest private bank in Brazil, according to S&P.
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