S&P: Ratings Affirmed On All Classes Of Odeon ABS 2007-1's CDO Notes Following Review
Today's rating actions follow our assessment of the transaction's performance since our Jan. 24, 2014 review, and the application of our criteria for collateralized debt obligations (CDOs) of pooled structured finance assets and criteria for assigning 'CCC' and 'CC' ratings (see "Related Criteria And Research").
We have performed our analysis using the available data at the time of our analysis from the trustee report dated May 31, 2013.
Since our January 2014 review, we have observed further negative performance in the transaction. The available credit enhancement has decreased for all rated classes of notes and the amount of cash collateral available to the transaction has decreased substantially to €13.47 million from €71.1 million at closing.
Further capitalization of interest (unpaid interest) on the class A-3 and B deferrable notes has increased the outstanding balance on these classes of notes.
The portfolio is concentrated among five industries and eight countries. All overcollateralization tests in the transaction are failing their documented triggers and have worsened since our previous review.
Due to the undercollateralization, principal on the class A-1 notes can only be fully paid with the help of excess interest proceeds. Therefore, the class A-1 notes are highly vulnerable to a loss of principal at maturity. We have therefore affirmed our 'CCC - (sf)' rating on the class A-1 notes. The other rated classes of notes are subordinated to the class A-1 notes and are extremely vulnerable to the loss of principal at maturity. We have therefore affirmed our 'CC (sf)' ratings on the class A-2, A-3, and B notes.
Odeon ABS 2007-1 is a hybrid CDO of asset-backed securities (ABS) transaction that closed in July 2007. At closing, the issuer entered into a credit default swap selling protection on a reference portfolio of primarily European corporate CDOs, and commercial and prime residential mortgage-backed securities (MBS). It invested the issuance proceeds of the class X to C (Sub) notes in collateral bonds held by the custodian.
At the same time, the issuer entered into a total return swap whereby the market-value risk on the collateral bonds is borne by the total return swap counterparty. Following the notification of a credit event under the credit default swap, the issuer funds any protection payments by selling a required portion of the collateral bonds at its face value to the TRS counterparty, thereby reducing the available collateral for the repayment of the notes.