Last month a lawsuit brought by holders of TruPS resulted in a ruling that stopped the sale of BankAtlantic to BB&T Corp. under the original terms. Following the ruling, BB&T amended the terms and proposed to assume the TruPS obligations.
The ruling might have positive implications for the sector's future performance, reported the latest index results from Fitch Ratings released today.
The terms stated that BB&T was not assuming BankAtlantic Bancorp's TruPS. BankAtlantic is the latter's wholly-owned bank subsidiary.
BB&T also said that it intended to redeem the TruPS in the near future. BankAtlantic has been deferring on its TruPS interest obligations since February 2009.
Fitch stated that, more significantly, the ruling will probably have favorable implications on the structure of future bank sales. It might also result in better terms for TruPS holders.
According to Fitch, the court ruling happened during a generally flat month for U.S. bank TruPS CDO default and deferral trends.
It happened just as defaults rose to 16.78% from 16.74%, while deferrals went up to 15.07% from 14.92%. The combined rate is currenlty at 31.85%, Fitch said.
The rating agency also reported that two bank issuers defaulted last month, reaching $15 million of collateral in two CDOs. One of the banks was previously deferring.
Fitch stated that 199 bank issuers, comprising roughly $6.3 billion and being held across 83 TruPS CDOs, were in default through the end of February.
Additionally, 373 deferring bank issuers were affecting interest payments on $5.7 billion worth of collateral.