Moody's Investors Service downgraded three classes of notes issued by Valeo Investment Grade CDO II Ltd today. The tranches included are: the $18.5 million class A-2 floating rate senior subordinated notes due June 1, 2013 downgraded to Ba3 from Baa3; the $13.75 million class B-1 floating rate senior subordinated notes due June 1, 2013 downgraded to Caa3 from B3; the $9.0 million Class B-2 8.697% fixed rate senior subordinated notes due June 1, 2013 downgraded to Caa3 from B3.
According to Moody's, the downgrades are the result of significant deterioration in the credit quality of the collateral pool. On the deal, the Moody's Average Debt Rating jumped to 1639 from 1250 and the percentage of below investment grade collateral (excluding defaulted securities) increased to 43% from 31%. Additionally, the percentage of assets rated Caa1 or lower more than doubled to 14% from 6%.
