A.M. Best Rates Dekania CDO II
A.M. Best via BizWire
OLDWICK, N.J.--(BUSINESS WIRE)--April 29, 2004--A.M. Best Co. has
assigned debt ratings to a multi-tranche collateralized debt
obligation (CDO) co-issued by two bankruptcy remote special purpose
vehicles, Dekania CDO II, Ltd. and Dekania CDO II, Inc. (the Issuers).
The initial purchaser for the transaction was Merrill Lynch. The
collateral manager is Dekania Capital Management, LLC.
The rated notes, totaling $373.2 million in principal, are
collateralized with trust preferred securities, surplus notes, senior
notes and secondary market securities, most of which are issued by
small to medium-sized U.S. insurance entities. The capital structure
includes $41.5 million of unrated preferred shares, which represent
the equity in the transaction.
A.M. Best has assigned ratings of "aaa" to the Class A-1 and Class
A-2 Senior Notes, "aa" to the Class B Notes, "a-" to the Class C-1 and
Class C-2 Notes, and "bbb" to the Class D-1 and D-2 Mezzanine Notes.
All the notes have a stated maturity date of August 23, 2034.
Notwithstanding, the Issuers can redeem the notes prior to the
maturity date through several mechanisms, including a successful
auction of the capital securities that commences on the 10th
anniversary of the transaction.
CDO Tranches
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Notes Amount($mm) Rating Coupon
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Class A-1 Senior Notes 200.0 aaa 3M LIBOR + 65 bps
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Class A-2 Senior Notes 42.0 aaa 3M LIBOR + 100 bps
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Class B Notes 60.0 aa 3M LIBOR + 135 bps
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Class C-1 Notes 21.2 a- 3M LIBOR + 190 bps
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Class C-2 Notes 30.0 a- 5 yr fixed 5.118% /
3M LIBOR + 190 bps
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Class D-1 Mezzanine Notes 15.0 bbb 3M LIBOR + 340 bps
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Class D-2 Mezzanine Notes 5.0 bbb 10 yr fixed 7.61% /
3M LIBOR + 340 bps
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Total Rated Notes 373.2 -
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Preferred Shares 41.5 N.R.
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TOTAL RATED &
UNRATED NOTES 414.7 -
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Major considerations in rating the notes included assessments of
their default risks, which are derived by applying A.M. Best's
proprietary insurance insolvency probabilities, payment deferral
probabilities and recovery statistics to the collateral; collateral
diversity; structural protection through the "waterfall" and other
mechanisms; counterparty swaps and interest-rate cap protection; legal
documentation; and ongoing monitoring of the transaction. A.M. Best
has reviewed all documentation and relies on certain legal and tax
opinions concerning the Issuers and aspects of the transaction.
A.M. Best will monitor the transaction until the notes mature or
are otherwise retired. Regular qualitative and quantitative reports
detailing the performance of the underlying collateral will be
analyzed, supporting ratings will be monitored and regular contact
will be maintained with the trustee to ensure that material changes
are communicated and assessed.
For a list of A.M. Best's debt ratings, please visit
http://www.ambest.com/debtratings/
A.M. Best Co., established in 1899, is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit A.M. Best's Web site at www.ambest.com.