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A.M. Best Affirms Debt Ratings of I-Preferred Term Securities I CDO Transaction

June 24, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Besthas affirmed the debt ratings on a multi-tranche collateralized debt obligation (CDO) co-issued by two bankruptcy remote special purpose vehicles: I-Preferred Term Securities I, Ltd. (Cayman Islands) and I-Preferred Term Securities I, Inc. (Delaware) (collectively known as I-Preferred Term Securities I and issuers). The outlook for all ratings is stable. (See below for a detailed listing of the ratings.)

The principal balance of the rated notes are collateralized by a pool of trust preferred securities, surplus notes and secondary market securities (collectively, the capital securities), primarily issued by small- to medium-size insurance companies. The capital securities are pledged as security to the notes. Interest paid by the issuers of the capital securities are the primary source of funds to pay operating expenses of the issuers and interest on the notes. Repayment of the principal of the notes is primarily funded from the redemption of the capital securities.

These rating actions primarily reflect: (1) the current issuer credit ratings (ICR) of the remaining issuers of the capital securities; (2) a stress of up to 250% on the assumed marginal default rates of insurers (derived from Best’s Idealized Default Rates of Insurers); (3) the amount of capital securities considered to be in distress; (4) recoveries of 0% after defaults of the capital securities; and (5) qualitative factors such as the effect of interest rate spikes; subordination levels associated with each rated tranche; the adjacency of very high investment grade ratings to very low non-investment grade ratings in the transaction’s capital structure; and the possibility that additional redemptions of highly rated entities will leave lower-rated companies in the collateral pool.

The ratings could be upgraded or downgraded and/or the outlook revised if there are material changes in the ICR of the remaining insurance carriers, an increase in the number of defaulted capital securities or significant termination of the number of existing capital securities.

The following debt ratings have been affirmed:

I-Preferred Term Securities I, Ltd.and I-Preferred Term Securities I, Inc.—

-- “aaa” on $174.00 million Floating Rate Class A-1 Senior Notes Due December 11, 2032
-- “aa+” on $12.00 million Fixed/Floating Rate Class A-2 Senior Notes Due December 11, 2032
-- “aa+” on $24.00 million Fixed/Floating Rate Class A-3 Senior Notes Due December 11, 2032
-- “b-” on $40.60 million Floating Class B-1 Mezzanine Notes Due December 11, 2032
-- “b-” on $33.20 million Fixed/Floating Class B-2 Mezzanine Notes Due December 11, 2032
-- “b-” on $28.20 million Fixed/Floating Class B-3 Mezzanine Notes Due December 11, 2032
-- “ccc-” on $16.00 million Floating Rate Class C Mezzanine Notes Due December 11, 2032


These are structured finance ratings.

For access to special reports, analytical methodologies and transactions relating to insurance-linked securities, please visit http://www3.ambest.com/sfc/.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.



A.M. Best Company

Asha Attoh-Okine,908-439-2200, ext. 5716

Managing Senior Financial Analyst

Insurance-Linked Securities

asha.attoh-okine@ambest.com

or

Elmo Chin, 908-439-2200, ext. 5227

Assistant Vice President

Insurance-Linked Securities

elmo.chin@ambest.com

or

Jim Peavy, 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com


Source: A.M. Best Company


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