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Moody's Investors Service Inc.

Moody's Upgrades Ratings on ALESCO Preferred Funding V, Ltd. Notes

Strategic Insights

— 2 min read

Moody's Ratings has upgraded the ratings on the following notes issued by ALESCO Preferred Funding V, Ltd. due to the transaction's ongoing deleveraging, increased over-collateralization ratios, and improved credit quality of the underlying portfolio. The Class A-2 notes have paid down by approximately 21.4% or $9 million since May 2024, and the over-collateralization ratio for the Class A-2 notes has improved to 431.40% from 339.27% in May 2024. The Series I and Series II Combination notes have also benefited from the reduction in Combination Notes Rated Balances and the improvement in the credit quality of the underlying portfolio.

Key Takeaways:

  • Moody's upgraded the ratings on the Class A-2 notes to Aaa (sf) from Aa1 (sf) due to the transaction's deleveraging and improved credit quality of the underlying portfolio.
  • The Class A-2 notes have paid down by approximately 21.4% or $9 million since May 2024, reducing the rated balance to $33,021,704.66.
  • The over-collateralization ratio for the Class A-2 notes has improved to 431.40% from 339.27% in May 2024.
  • The Series I and Series II Combination notes have also benefited from the reduction in Combination Notes Rated Balances, with decreases of 46.4% or $1.1 million and 20.6% or $187 thousand, respectively, since May 2024.
  • The weighted average rating factor (WARF) has improved to 672 from 768 in May 2024, reflecting the transaction's improved credit quality.
  • Moody's did not take any actions on the Class B, Class C-1, Class C-2, Class C-3, and Class D notes, as their expected losses remain commensurate with their current ratings.
  • The transaction has benefitted from the diversion of excess interest proceeds and the use of proceeds from redemptions of assets in the collateral pool.

Statistics:

  • Current rated balance of the Class A-2 notes: $33,021,704.66
  • Over-collateralization ratio for the Class A-2 notes: 431.40% (as of May 2024 level: 339.27%)
  • Combination Notes Rated Balances for Series I: decreased by 46.4% or $1.1 million since May 2024.
  • Combination Notes Rated Balances for Series II: decreased by 20.6% or $187 thousand since May 2024.
  • Weighted average rating factor (WARF): 672 (as of May 2024 level: 768)
  • Performing par and principal proceeds balance: $141.3 million
  • Defaulted par: $30.4 million
  • Weighted average default probability: 5.19% (implying a WARF of 672)
  • Weighted average recovery rate upon default: 10.0%

Sources:

  • "Moody's Approach to Rating TruPS CDOs" (published in July 2024 and available at https://ratings.moodys.com/rmc-documents/425579).
  • Moody's Ratings page on https://ratings.moodys.com.

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