Fitch Ratings has downgraded three classes and affirmed one class of Wilbraham CBO issued notes. Wilbraham is a collateralized debt obligation that is managed by Babson Capital Management and consists of high-yield bonds and loans. Exposure to bankrupt airlines contributed to the move. Wilbraham's portfolio has $7 million worth of unsecured exposure to Delta Air Lines and Northwest Airlines. This allocation makes up 4.6% of the overall portfolio of $151.7 million. In addition, Tenet Healthcare and Dana Corp. make up 5.2% of the portfolio and they are both under ratings watch negative by Fitch.
"The downgrade relates to Wilbraham's negative ratings exposure to corporate credits Delta, Northwest, Tenet, Dana and Collins & Aikman. It's not unlike several other deals in the same vintage, but it is more pronounced due to its cumulative exposure to these debts," said Marion Silverman, an analyst at Fitch.
Around $106 million of class A-1 notes were affirmed by Fitch as AA while $19 million of class A-2 notes have been downgraded from BBB- to BB+. Almost $9 million of B-1 notes have been downgraded to C from CC and about $26 million of class B-2 notes have also been downgraded from CC to C. Just under $31 million of class C notes remained at their current rating of C.
The three downgraded ratings are the result of a continued deterioration of collateral that has been enhanced by the application of principle proceeds to pay interest to the class A-1 and A-2 notes. The class A-1 notes still have around 46.3% of the original balance outstanding. The class B and C notes are expected to continue to capitalize interest for the next several years. However, it remains unlikely that either of the notes will receive any new cash flow.