Fitch Ratings has downgraded four classes of notes that were issued by Project Funding Corporation I. PFC I is a collateralized debt obligation that was administered by Credit Suisse First Boston. Fitch has removed its rating watch negative following the downgrades. Fitch downgraded the notes because it felt that they no longer accurately represented the new risk to note holders with their prior ratings. Fitch also foresees the possibility that the class IV notes may deteriorate further and affect the principle balance that remains.
The downgrades include $87 million of class I senior notes downgraded from AA to BBB and around $3 million of class II senior notes downgraded to B from BBB. Additionally, $3.5 million of class III mezzanine notes have been downgraded from BB to CCC and almost $4 million in class IV mezzanine notes downgraded from B to CC.
PFC I issued $617 million in debt and equity securities which it invested in a portfolio of project financing loans that were originated by CSFB. PFC I closed March 5, 1998. The reason for the downgrade of the ratings since the last rating in September 2004, is that there has been credit deterioration. Over 1/3 of the notes are held by obligors that CSFB rates internally as B+ or lower.
At the July 15, 2005 payment date, there were 16 loans spread among 13 entities with obligations to the loans. The notes have paid down about 84% of the original balance to date. One of the 13 obligors, which accounts for around 4% of the balance of the notes, is considered in default by CSFB. The bank declined to name the obligor.
Fitch's ratings of the class I notes deal with whether the investors will receive interest in a timely fashion and the stated balance by the final payment date. The ratings of the class II-IV notes deals with investors receiving their ultimate and compensation interest payments on the notes. Calls to CSFB and Fitch went unreturned as of press time.