Canadian ABCP : Planet Trust Downgraded

DBRS has now downgraded Planet Trust Series E notes, which join Apsley Trust in the doghouse:

DBRS has today downgraded the Series E ratings of Planet Trust (Planet) to R-2 (high) from R-1 (high). The ratings remain Under Review with Developing Implications.

Approximately $2.7 billion of the collateralized debt obligation (CDO) transactions funded in Canadian ABCP directly have full or partial exposure to U.S. residential mortgage-backed securities (RMBS). This total includes about $143 million held by Planet Series E, consisting of a $85 million transaction representing approximately 14% of the assets of Series E (the Transaction) and a $59 million transaction representing approximately 10% of the assets of Series E, each fully funded (unleveraged).

The Transaction is exposed to pools of U.S. non-prime residential mortgages, as well as other CDOs backed by residential mortgages, among other assets. In accordance with its CDO rating methodology, DBRS has relied in the past on ratings from other major rating agencies as inputs to its CDO model. Since the Transaction’s inception, the Transaction has met all of the minimum requirements for a AAA rating. Recently, however, one rating agency took its largest single-day rating action with respect to the U.S. non-prime residential mortgage market when it downgraded or put on negative watch US$270 billion of U.S. RMBS bonds and US$264 billion of CDOs. As a result, the Transaction now has about 12% of its portfolio ratings on negative watch by other rating agencies (weighted by notional amount).

As noted in a commentary released simultaneously with this press release, DBRS has revised its surveillance methodology in regard to the use of other agencies’ ratings of U.S. RMBS referenced by Canadian CDOs. As a result, notching assumptions were applied to 2006 and 2007 vintage U.S. RMBS currently on negative credit watch by other rating agencies. Also, CDOs with exposure to 2006 and 2007 vintage U.S. RMBS were notched based on factors such as subordination, vintage concentration and underlying ratings.

As a result of the application of the revised methodology, a long-term rating of BBB (high) has been assigned to the Transaction by DBRS.

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