Moody's Upgrades Rating on E*Trade ABS CDO III, Ltd. Notes

Strategic Insights -

Moody's Investors Service has upgraded the rating on the Class A-2 Senior Secured Floating Rate Notes due 2040, issued by E*Trade ABS CDO III, Ltd., to Caa2 (sf) from Ca (sf). The upgrade reflects the current level of credit enhancement available to the notes, recent performance, and analysis of the transaction structures.

Key Takeaways:

  • The rating upgrade on the Class A-2 notes was driven by the current level of credit enhancement available to the notes, which has improved since the last rating action in May 2010.
  • The notes have either incurred a missed interest payment or are currently undercollateralized, but Moody's expects to mitigate this risk through updated loss-given-default expectations.
  • The underlying portfolio of structured finance assets has experienced losses, but the expected losses remain commensurate with the current rating of the other rated classes in the deal.
  • The rating methodology used in this rating action was "Moody's Approach to Rating SF CDOs," published in July 2024.
  • The performance of the Notes is subject to uncertainty, and changes in economic and credit conditions may impact the rating outcomes.
  • Deal features such as amortization profile assumptions and waterfall features can also influence the rating outcomes.

Statistics:

  • The current outstanding balance of the Class A-2 notes is $7,181,739.07.
  • The notes were issued in December 2004.
  • The rating on the Class A-2 notes was upgraded to Caa2 (sf) from Ca (sf).
  • The expected losses for the underlying portfolio are a percent of the original notes balance.
  • The performance of the Rated Notes is sensitive to the performance of the underlying portfolio.

Sources:

  • "Moody's Ratings (Moody's) has upgraded the rating on notes issued by E*Trade ABS CDO III, Ltd," [www.moodys.com](http://www.moodys.com) (no date mentioned).
  • "Moody's Approach to Rating SF CDOs," published in July 2024, available at [https://ratings.moodys.com/rmc-documents/425578](https://ratings.moodys.com/rmc-documents/425578).