A.M. Best has upgraded the debt ratings on four tranches and
affirmed the debt ratings on two additional tranches on a multi-tranche
collateralized debt obligation (CDO) co-issued by two bankruptcy remote
special purpose vehicles: I-Preferred Term Securities IV, Ltd.
(Cayman Islands) and I-Preferred Term Securities IV, Inc.
(Delaware) (collectively known as I-Preferred Term Securities IV and
issuers). The outlook for all ratings is stable. (See below for a
detailed listing of the debt ratings.)
The principal balance of the rated notes is collateralized by a pool of
trust preferred securities, surplus notes and secondary market
securities (collectively, the capital securities), primarily issued by
small- to medium-size insurance companies and a few deposit taking
institutions. The capital securities are pledged as security to the
notes. Interest paid by the issuers of the capital securities are the
primary source of funds to pay operating expenses of the issuers and
interest on the notes. Repayment of the principal for the notes is
primarily funded from the redemption of capital securities.
These rating actions primarily reflect: (1) the current issuer credit
ratings (ICRs) of the remaining issuers of the capital securities and
the number of terminated capital securities; (2) a stress of up to 250%
on the assumed marginal default rates of insurers (derived from Best's
Idealized Default Rates of Insurers); (3) the amount of capital
securities considered to be in distress; (4) recoveries of 0% after
defaults of the capital securities; and (5) qualitative factors such as
the effect of iterest rate spikes; the impact to the subordination
levels associated with each rated tranche as a result of the additional
excess spread from Interest Collections; the adjacency of very high
investment grade ratings to very low non-investment grade ratings in the
transaction's capital structure; and the possibility that additional
redemptions of highly rated entities will leave lower-rated companies in
the collateral pool.
The debt ratings could be upgraded or downgraded and/or the outlook
revised if there are material changes in the ICRs of the remaining
insurance carriers; an increase in the number of defaulted capital
securities or significant termination of the number of existing capital
The following debt ratings have been upgraded:
I-Preferred Term Securities IV Ltd./Inc.--- to "a-" from
"bbb" on $37.00 million Floating Rate Class A-2 Senior Notes Due June
24, 2034-- to "a-" from "bbb" on $13.90 million Fixed/Floating
Rate Class A-3 Senior Notes Due June 24, 2034-- to "ccc-" from "c"
on $54.65 million Floating Rate Class B-1 Mezzanine Notes Due June 24,
2034-- to "ccc-" from "c" on $25.50 million Fixed/Floating Rate
Class B-2 Mezzanine Notes Due June 24, 2034
The following debt ratings have been affirmed:
I-Preferred Term Securities IV Ltd./Inc.--- "c" on $12.45
million Floating Rate Class C Mezzanine Notes Due June 24, 2034--
"c" on $6.20 million Floating Rate Class D Subordinate Notes Due June
These are structured finance ratings.
For access to special reports, analytical methodologies and transactions
relating to insurance-linked securities, please visit http://www3.ambest.com/sfc/.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS
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