Credit-Based Asset Servicing and Securitization LLC (C-BASS) and lead underwriter Credit Suisse First Boston were glowing last Monday on the news that Fitch Ratings had upgraded several tranches on C-Bass CBO Ltd 1, a rare event in the sector.
"The fact that the double-B's were upgraded to triple-B in this deal is impressive," noted a market source. C-Bass retains all of the non-investment grade tranches including the equity in its CDOs because the firm uses the transactions as a source of financing for its business.
The assets backing the CDO are 70% RMBS (residential A, residential B/C, HLTV, and MH, respectively), with the remainder made up of CMBS and ABS.
Since the deal uses a static pool structure with no reinvestment period, any principal from assets paying down go toward retiring the rated notes in sequential order from triple-A down. The following bullet points detail Fitch's rationale for the upgrade:
*Increase in the credit enhancement of the rated notes;
*excess interest available to service the interest payments;
*steady increase in O/C and interest coverage;
*steady improvement in the WARF from 30.0 at closing to 29.4 as of 2/28/02
*paydown of the CBO of approx 16% as of 3/31/02 (the deal closed March 5, 2001);
*overall improvement in pool, including 70% RMBS;
*increase of the weighted-average seasoning to approx 2.61y;
*increase in the weighted-average pay down of the underlying pools of the bonds to approximately 46% as of Feb. 28, 2002.