KBRA affirms Trapeza CDO XII note ratings in bank, insurance CDO review

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Trapeza CDO XII ratings affirmed

Highlights

KBRA affirms ratings on five note classes of Trapeza CDO XII, backed by $207.8 million in TruPS, surplus notes, and subordinated debt.
Portfolio's K-WARF is 397 (BBB-/BB+) with $69.5 million of defaults recognized and liabilities rising to $318.6 million as deferred interest increases $5.5 million year over year.
Class D and E coverage tests remain below triggers, multiple classes carry deferred interest, and deal remains static with maturity scheduled for April 6, 2042.

Portfolio profile and rating action

As reported by Kroll Bond Rating Agency, KBRA affirms ratings on five classes of notes issued by Trapeza CDO XII, Ltd. and Trapeza CDO XII, Inc., a cash flow collateralized debt obligation managed by Hildene Collateral Management Company, LLC.

The transaction is backed by TruPS securities, surplus notes and subordinated debt issued by community and regional banks, insurance companies and their holding companies. KBRA says the portfolio's K-WARF is 397, placing it within the BBB- to BB+ category. The deal is static and does not allow reinvestments.

At the initial rating, the performing portfolio consisted of 20 assets from 20 obligors with total collateral par value of $207.8 million and liabilities of $308.5 million. It now contains 20 performing obligors with total performing par value of $207.8 million and liabilities of $318.6 million, while $69.5 million of defaults are recognized as of the latest portfolio date.

Coverage pressures and noteholder implications

The liabilities increase by a net $5.5 million because the total deferred interest balance rises by $5.5 million since last year, with no change in underlying note principal. KBRA says the Class D and E coverage tests remain below their respective triggers, while Class D-1, D-2, E-1, E-2 and F continue to carry deferred interest.

There is no prepayment, and the deal matures on April 6, 2042. KBRA says its ratings on the Class A-2 and A-3 notes represent timely payment of interest and ultimate payment of principal by the stated maturity date, while its ratings on the Class B, C-1 and C-2 notes consider the ultimate payment of interest and principal by the applicable stated maturity date.

In our earlier coverage of Hainan Rubber’s proposed subordinated perpetual sustainable securities, we explained why the notes were rated below the issuer rating due to their junior ranking in the capital structure and the option to defer coupons. We also outlined the group’s high leverage and liquidity position, alongside the factors supporting its funding access and the broader sector considerations flagged by the rating agency.

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